Moody’s Investors Service revised the outlook to negative from stable on the Philadelphia School District’s general obligation bonds, and affirmed its underlying Ba1 rating.

The rating affects $3.1 billion of long-term GO debt.

“The negative outlook reflects the district’s weak financial position, including a large budget gap for fiscal 2013 and the likelihood of a deficit borrowing to close the gap later in the year,” Moody’s analysts said in a report.

Its 2013 budget gap is estimated to be over $200 million. The district closed most of its significant budget gap for fiscal 2012 with a variety of adjustments, including the use of both ongoing and one-time revenue enhancements and expenditure savings, the report said.

Inability to execute deficit borrowing in fiscal 2013, an operating deficit larger than expected, and continued structural imbalance in fiscal 2014 could cause a downgrade.

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