Moody’s Investors Service stripped the long-struggling East St. Louis, Ill., school district of its investment-grade rating as savings expected under a restructuring plan to fully materialize leaving the district with an operating deficit this year. The district is under state oversight

The rating on the district — formally known as St. Clair County School District #189 — was lowered three notches to Ba1 from Baa1, the lowest investment-grade level, and put on review for a further downgrade.

The district’s general obligation bonds are supported by a property tax levy that is unlimited as to rate or amount.

The downgrade also is due to a projected negative cash balance that could occur as soon as May and would require a $9 million supplemental appropriation from Illinois.

The credit is also challenged by a declining tax base in the county, which continues to struggle economically.

“The rating remains under review for possible downgrade pending the resolution of a number of contingencies that could impact the district’s immediate cash flow as well as longer-term ability to regain structural balance and rebuild reserves,” Moody’s wrote.

The district is working on a possible state aid intercept bond issuance for cash-flow needs, but that would reduce available state aid for operations and debt service in the next fiscal year.

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