NEW YORK - Moody's Investors Service said it has assigned an A1 rating to Centinela Valley Union High School District, Calif.'s general obligation bonds, election of 2010, 2012 Series A in the approximate amount of $72.0 million, and downgraded the rating on the district's outstanding parity debt totaling approximately $95.7 million to A1 from Aa3.

The current offering is secured by an unlimited property tax pledge of the district. Bond proceeds will be used to finance school construction projects at three high schools.

The downgrade reflects the deterioration of the district's financial position that is materially weaker than previously budgeted expectations.

Current expectations indicate that the district will likely remain at this weakened level due to additional pressure that will require considerable expenditure reductions to regain budgetary balance. The district estimated that it would end fiscal 2011 with an 18% ending fund balance, which actually turned out to be 15.9% of revenues from deficit spending of $5.5 million.

Similarly, the district projected to draw down fiscal 2012 reserves by approximately $1.0 million, when the actual draw down will be closer $4.8 million.

The district's closing fiscal 2012 financial position is not consistent with a Aa3 rating nor is the district solidly in a position to effectively manage any potential contingencies that may be imposed by the state in the coming fiscal year due to the previous years' deficit spending.

The district is positioned to make significant expenditure reductions in the next fiscal year, but full enactment of these expenditure reductions is contingent upon budget cuts coming from the state.

The A1 rating also reflects the district's large tax base, below-average socioeconomic profile, historically adequate reserves, and low debt levels.

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