Moody's Investors Service said it has downgraded to Baa1 from A2 the underlying rating on Maroa-Forsyth Community Unit School District No. 2, Ill.'s general obligation pledge.

Concurrently, Moody's has assigned a negative outlook. The Baa1 rating and negative outlook applies to $22.6 million in outstanding general obligation debt.

The outstanding bonds are secured by the district's general obligation unlimited tax pledge.

The downgrade incorporates its deficit general fund position, with reliance on its working cash fund to provide operational liquidity, and Moody's expectations that reserve levels will remain extremely narrow in the near term.

The Baa1 rating also reflects the district's modestly sized tax base located in central Illinois (GO rated A2/stable outlook) near Decatur (Aa2); the district's above average socioeconomic characteristics; and its elevated direct debt profile with average principal amortization.

The negative outlook reflects the district's reported financial position of its combined operating funds at the end of fiscal 2012, which is budgeted to fall below $200,000 by yearend fiscal 2013 without the issuance of additional working cash bonds.

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