Moody's Investors Service said it has downgraded its rating to Aa3 from Aa2 on Montgomery County Community College, Pa.'s $54.6 million revenue bonds issued through the State Public School Building Authority.

The rating outlook has been revised to negative from stable.

The downgrade to Aa3 is driven by the college's thin operating performance and expected FY 2013 operating deficit due to a 30% cut in operating support from the Montgomery County, Pa., (rated Aa1/stable) in FY 2013, weakened financial positions of the commonwealth and county, plans to issue $34 million of additional debt within the next year, as well as enrollment declines over the past two years.

The Aa3 rating also incorporates MCCC's market position as a regional community college located in Montgomery County, with healthy net tuition per student growth over the past two years, continued debt service support from the commonwealth and county, sound financial resource coverage of debt and strong liquidity.

The negative outlook reflects uncertainty with regard to whether MCCC will be able to adjust to its new funding level and improve its operating margin as soon as FY 2014.

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