Moody’s Investors Service has downgraded the long-term underlying rating on the Sacramento Transportation Authority’s variable-rate revenue bonds from to Aa3 from Aa2.

The downgrade reflects the STA’s projected narrowing liquidity of $30 million in reserve funds by year-end and its lower additional-bonds test in light of its debt portfolio, which is entirely variable rate.

While showing signs of improvement, the Sacramento-area economy remains anemic, a factor also incorporated into the downgrade. State and local government jobs account for one-quarter of total employment in the California capital.

The sectors are in cost-cutting mode, but other economic drivers include service sector jobs in health care and finance. Both are important to the local economy, which is facing some uncertainty with unemployment in June at 12.6% countywide, compared to 12.1% statewide and 9.3% nationally.

The full-sized cash reserve fund mitigates but does not entirely offset the authority’s limited liquidity, analysts said. The half-cent sales tax that provides revenue for the bonds is collected throughout Sacramento County, which has a population of 1.4 million.

Analysts said they gave the agency a Aa2 rating because of the large size and diversity of the sales tax base. Sales tax revenue rose by 4.5% in fiscal 2011, somewhat low compared to other California counties but a substantial improvement over the combined 11.3% decline of the past four year through 2010.

The authority is expected to issue $30 million in new bonds in 2013, which will decrease coverage ratio to 5.8 times.

Analysts estimates indicate a fund balance decline from $124.3 million in 2010 to $30 million by the end of this year, creating a narrow margin in the context of the agency’s variable-rate debt portfolio.

The authority is currently in the process of replacing one of its standby bond purchase agreement providers and extending the maturities on two of its outstanding SBPAs. Moody’s said its rating presumes timely completion of that process.

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