East Ramapo CSD, N.Y., Downgraded to Baa1 by Moody's

Moody's Investors Service said it has downgraded to Baa1 from A2 the underlying rating on East Ramapo Central School District, N.Y.'s $14.4 million in outstanding general obligation debt; the outlook remains negative.

The district's debt is secured by an unlimited pledge.

The downgrade to Baa1 reflects ongoing deterioration in the district's financial position with the expectation of a negative general fund balance at the end of fiscal 2013. The weakened financial position is the result of a continued structural imbalance driven by underperforming revenues. The rating also incorporates the district's sizeable tax base and manageable debt position.

The negative outlook incorporates the expectation the district will continue to face financial strain from fixed cost pressures related to pensions and other employee benefits combined with limited revenue raising ability, especially in light of its difficulty in gaining voter support for budgets.

Moody's notes that the school district has overlapping boundaries with the town of Ramapo (GO rated A1/on review for downgrade), which is currently under federal investigation for reasons that have not been publicly disclosed. The school district is an autonomous governmental entity from the town and there has been no indication that the federal investigation extends to the school district or any of its management or officials.

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