Standard & Poor's Ratings Services said it lowered its school issuer credit rating and underlying rating to BBB-minus from BBB on Rio Vista Independent School District, Texas' previously issued general obligation bonds and placed the ratings on CreditWatch with negative implications.

At the same time, Standard & Poor's affirmed its AAA long-term rating on the district's existing bonds guaranteed by the Texas Permanent School Fund. The AAA program rating reflects the strength and stability of the Texas Permanent School Fund's guarantee. The outlook on the long-term ratings is stable.

"The lowered rating reflects our view of the worsening of the district's already negative operating reserve due to its structural budget imbalance despite significant budget cuts," said Standard & Poor's credit analyst Jennifer Garza. "The CreditWatch listing reflects the potential for additional negative rating actions should a tax ratification election or TRE fail in October, causing the district's financial stress to worsen in the short-term," Garza added.

"However, we could remove the CreditWatch listing and assign a stable outlook if the TRE passes, since the projected revenue generated with the increased levy would close the budget gap and allow for the district to return to positive reserves within two to three years," Garza said.

Officials do not anticipate issuing further debt in the next two years.

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