Moody’s Investors Service last week affirmed the A2 rating on the Cleveland Municipal School District’s outstanding general obligation unlimited-tax debt, but revised the outlook to negative from stable due in part to the district’s thin liquidity.
The school district, which serves the city of Cleveland, is asking voters to approve a new operating levy in November. If voters reject the measure, the district will have “extremely narrow liquidity at the end of fiscal 2013,” Moody’s said in a report on the outlook revision.
Even if the levy is passed, the district may have a hard time rebuilding its reserves amid cuts in state aid from Ohio and a 21% property tax delinquency rate, analysts said.
On the plus side, the district is located in a large and diverse local economy and its managers have made $111 million of cuts over the last two years, Moody’s said.
Despite the cuts, the district faces a $39 million budget shortfall in 2013 and enrollment continues to decline.
“The outlook on the Cleveland Metropolitan School District is negative, representing our belief that the district’s cash position may further decline to even narrower levels should the district not be able to pass its operating levy request in November 2012,” Moody’s said in the report. “Further, the financial pressures that the district continues to face may present challenges in the district’s ability to rebuild reserves to a satisfactory level.”