While state cutbacks to education funding in California have stressed the Los Angeles Unified School District's operating budget, resulting in the layoff of 1,900 teachers, they have not hampered its building program.

The district issued $4 billion in bonds in 2010 and is now undergoing a $430 million refunding with Citi as the lead underwriter.

"We opened up retail orders on the refunding on Monday and plan to open the refunding up to institutional investors on Tuesday," said Yumi Takahashi, LAUSD's budget director. "We wanted to capitalize on the low interest rates and savings available in the current environment."

Standard & Poor's affirmed its AA-minus rating and stable outlook on the refunding GO bonds and the district's GO bond debt.

"Although we expect state funding reductions and negative enrollment trends to continue to challenge the district's budget, implementation of its fiscal 2011 stabilization plan resulted in an estimated ending general fund balance that was better than the third-quarter forecast," S&P credit analyst Misty Newland said in a news release.

Moody's Investors Service also affirmed its Aa2 stable outlook on its refunding GO bonds and the district's GO bond debt. Analysts said they expect the district will likely preserve financial flexibility by making all necessary budget reductions to offset revenue reductions from the state.

Last year's $4 billion of bond issuance was part of a $20.1 billion building program started by LAUSD in 1997 to relieve overcrowding, modernize schools and restore its 219 year-round schools to a standard two-semester system. Voters have approved four separate propositions over the past decade allowing the district to issue GO bonds.

The strengths listed by S&P analysts include strong fund balances despite recurring budgetary challenges and strains due to state funding uncertainties and declining enrollment, on which revenue limited funding is based, according to the report. The deep and diverse taxable assessed-value base and a moderate debt burden also swayed analysts toward the rating they provided, the report said.

However, Standard & Poor's analysts concerns expressed over the budget pressures resulting from state funding reductions and deferrals and the growing cost of health care and retirement benefits.

"We expected the affirmation of the rating, because of the district's efforts to keep our finances strong despite the tough financial times," Takahashi said.

Last year's $4 billion issuance included traditional tax-exempt bonds and also took advantage of the Build America Bond and qualified school construction bond programs.

LAUSD had spent $494 million or 15.3% of the $4 billion as of May 15, leaving a balance of $2.7 billion for remaining building projects, according to district documents. By next year, all but two schools will be off multi-track scheduling and able to return to a traditional two-semester system, Takahashi said.

When the district completes the building program it will have constructed 155 new schools and have completed 19,000 modernization and repair projects, according to district financial reports.

Officials aren't planning any new-money issuance over the next few years, because they just want to watch assessed valuations at this time, Takahashi said.

LAUSD, which encompasses a 710-square-mile region, is the country's second largest public school district after New York City's school system.

The Los Angeles district has 678,441 students enrolled this year. It will have 813 schools after it completes its building program.

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