Fitch Ratings this week downgraded Natomas Unified School District general obligation bonds to A-minus from A and revised its outlook on the debt to negative from stable.

California school districts are facing budget gaps amid declines in state support for education, and districts that don’t close the gaps are facing downgrades. Fitch last week downgraded the Berryessa Unified School District to AA-minus from AA.

The Natomas USD downgrade “reflects the district’s deteriorating financial position due to the reduced state aid and failed efforts to correct its structural imbalance” Fitch analysts Caitlin Duffy and Alan Gibson said in a report. “The district is forecasting a significant draw down to its fund balance for fiscal 2009 which will provide limited operating flexibility.”

The agency added a negative outlook to the bonds because the district’s financial projections show it continuing to run deficits that would deplete its reserves by fiscal 2011. Natomas had an operating deficit of $874,000 in fiscal 2008 and expects a $6 million deficit this year.

“Absent significant action to counter these operating pressures, the district currently projects the general fund balance will decline to a negative $13.4 million balance by fiscal 2011,” Duffy and Gibson said.

Fitch also said the Sacramento County district, which has 11,400 students, has “moderate to high debt levels” with a slow amortization schedule for its bonds. It has about $30.5 million of GOs outstanding.

Natomas USD has experienced “strong” growth in assessed values, and the general obligation bonds are backed by property taxes. But the district lies in a flood plain and faces a temporary halt in growth because its levees need upgrades.

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