By admin 
Fitch Ratings analysts grew more skeptical about Sacramento City Unified’s ability to pay its bills, lowering its overall credit rating this week to a “highly speculative” level in which an economic downturn could make it harder for the district to meet its future financial obligations.
Read more High-Speed Rail Authority board strips CEO of control over contracts
On Thursday, Fitch Ratings, one of the nation’s three major credit rating agencies, downgraded Sacramento City Unified’s Issuer Default Rating from BB- to B+, citing “ineffective budget management” and a “sharp rise in spending” as factors behind the district’s financial distress.
The agency’s update comes as district officials scramble to keep the district afloat amid a $222 million structural deficit and as they work to avoid state receivership. Receivership could follow a state emergency loan, stripping the school board of its governing authority, replacing the superintendent and placing the district under strict state oversight until the loan is repaid with interest.
“The downgrade reflects continued fiscal deterioration that the district’s inability to reach consensus with the Sacramento County Office of Education on a viable path toward fiscal stabilization has exacerbated,” the agency wrote in a release.
“The district has adopted a series of fiscal stabilization plans intended to generate savings, but it remains uncertain whether those measures will be enough to restore budgetary balance and maintain positive cash balances.”
Read more Sacramento man, 28, identified as second person found dead near Plumas Lake
Fitch also downgraded the district’s dedicated-tax general obligation bond rating and its lease revenue bond rating. The latest downgrade follows Fitch plunging the district’s bond rating to junk status in the spring.
The Fitch Ratings’ analysts described the district depleted its reserves last school year and has very little cash on hand, with limited options to borrow. The district may need state intervention or an emergency loan to keep operating, the agency warned.
“The district’s fiscal distress has stemmed primarily from a history of poor budgetary oversight and overspending, weak management practices, and an inadequate and delayed response to budgetary challenges.”
Meanwhile, tensions between the school district and the Sacramento County Office of Education have escalated in recent months as the two agencies have disagreed over how the district should address its fiscal crisis. The latest dispute centers on revenue assumptions in the district’s long-term budget plan, which the county office-appointed fiscal adviser said raised “grave concerns.”
Read more JoeD remembers his Sacbee stories, players and coaches. ‘It’s been a joyous ride’