Moody’s Investors Service has downgraded to A2 from A1 the outstanding general obligation debt of the Ticonderoga Central School District in northeast New York, and assigned a negative outlook.

The rating and outlook affect $26.9 million of outstanding debt.

The downgrade is based on the district’s declining financial position and weak liquidity.

The new rating also takes into account the school district’s moderately sized tax base with below-average wealth indicators.

“The negative outlook reflects Moody’s expectation that the district will be challenged to return to structurally balanced operations in the near-term and re-build fund balance to historical levels in light of ongoing increases to health contribution costs, reduced state aid, and a statutory 2% levy cap,” analysts said in a report.

A worse-than-expected ending fund balance and further use of reserves in fiscal 2013 could make the rating go down, Moody’s said.

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