Moody's Investors Service said it has downgraded to Ba1 from Baa2 the general obligation rating of Perry Public Schools, Mich.

The district has $22.2 million of GO debt, of which $4.7 million is Moody's rated. The outlook remains negative.

The district's general obligation bonds are secured by the district's unlimited tax pledge as authorized by voters.

The Ba1 rating reflects a multi-year trend of operating shortfalls that has resulted in a deficit general fund balance position. The trend of operational imbalance is largely attributable to the district's delayed enactment of expenditure reductions to offset revenue declines associated with declining enrollment, driven by outmigration of students to neighboring districts and demographic factors.

The Ba1 rating further incorporates the district's modestly sized and depreciating tax base located near Lansing (GO rated A1), average demographic profile, and elevated debt burden. The negative outlook is based on the district's declining enrollment trend, which will likely continue to be a budgetary challenge despite recently enacted expenditure reductions, as the district does not have the flexibility to increase revenues beyond its state allocated per pupil foundation funding.

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