UPDATE 1-Fitch cuts ratings for Sacramento City Unified SD

Fri May 10, 2013 6:24pm EDT

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May 10 (Reuters) - Citing concerns about the Sacramento City Unified School District's reserves, Fitch Ratings cut on Friday the California district's general obligation bond rating to A-plus from AA-minus, a move affecting about $313.7 million of debt.

Fitch also lowered $33.5 million of the district's certificates of participation to A from A-plus.

Fitch in a statement said its downgrades reflect the district's "weak financial reserve position and willingness to spend down reserves to low levels during periods of state funding pressure."

The district serves California's capital. Its economy has struggled due to the housing downturn and spending cuts imposed by the state government to balance its books in recent years.

"The district has aggressively trimmed expenditures and is expected to return its budgets to structural balance over the next year or two with the stabilization of the state funding environment. However, Fitch does not expect reserves to improve for some time," the rating agency said.

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