Standard & Poor's Ratings Services said it revised the outlook to positive from stable on Atwater Elementary School District, Calif.'s general obligation bonds and appropriation-backed debt.

At the same time, Standard & Poor's affirmed its A long-term rating and underlying rating (SPUR) on the district's existing GO debt and its A-minus SPUR on the district's appropriation-backed debt. Finally, Standard & Poor's assigned its A long-term rating to the district's series 2012 GO refunding bonds.

"The positive outlook reflects our view of the district's growing general fund balances and very strong financial operations," said Standard & Poor's credit analyst Bryan Moore.

The ratings reflect the district's: stable average daily attendance, on which the state per-pupil funding formula is based; very strong assigned and unassigned general fund balances, with a recently adopted reserve policy of 15% of expenditures; and low debt burden, including a low debt service carrying charge.

During the two-year outlook timeframe, and despite the uncertainty associated with state funding, management will likely continue to make the necessary budget adjustments to maintain very strong general fund reserves. Should the district continue to do so, the ratings could rise. However, should the state fiscal pressures and local pressures continue, causing the district to draw down the reserves below a level S&P considers strong, it could revise the outlook back to stable.

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