NEW YORK - Moody's Investors Service said it has downgraded to A2 from A1 the rating on $181 million of outstanding general obligation San Bernardino City Unified School District, Calif., debt, and downgraded to Baa1 from A3 the rating on $53 million of outstanding certificates of participation.

The downgrade reflects the district's weakened financial flexibility, as evidenced by its substantial inter-fund borrowing to maintain positive, year-end liquidity in its general fund, and the likely near-term decline in its already weakened general fund balance.

These factors along with a weakened local tax base and economy and dwindling enrollment poorly position it to manage any additional cuts in state aid.

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