The district’s high quality credit rating with Moody’s Investor Services has dropped a notch due to reduced fiscal reserves and its relative debt load, according to a report issued by the firm this month. However, its excellent AA+ rating was extended in July 2012 by the other major rating agency, Standard & Poor’s.

The new Aa2 rating from Moody’s – down from Aa3 – is still considered a high-quality municipal bond rating. In its report, Moody’s indicates that the district’s use of reserve funds in recent budgets, smaller tax base, and “above-average” debt load factored into the change.

The district’s diminished reserves are the result of a period of unprecedented fiscal challenges for New York’s schools. Reserves include both funds for designated purposes, such as debt service or tax certiorari (assessment challenges) and undesignated reserves, which help meet unanticipated expenses, moderate tax increases, and offset other revenue losses. The total amount the district had in reserves at the end of the 2009-10 year was $11.6 million; that figure is now $7.3 million.

Officials said the use of reserves during this period helped avoid program reductions for students and maintain the quality of education in Niskayuna despite reduced state aid. During the last three years, the district lost more than $8 million in state funding through the so-called “Gap Elimination Adjustment,” the name for reductions in planned school aid designed to help the state close its own deficit.

The district has established a multi-year financial plan that calls for reduced reliance on reserves in order to build them back up and better balance operating expenditures and revenues. As fiscal challenges for schools have persisted, the district has focused on reducing spending; the current year’s budget total is $1.85 million less than it was last year. This means that difficult decisions are expected in the coming budget cycles.

The Moody’s report also cites the district’s outstanding debt, which is primarily related to the now-complete $94.5 million capital construction project that voters approved in 2006. The district’s total annual debt service costs are about $10 million, with approximately 70 percent of that money coming back to the district in state building aid reimbursements. For this reason, Moody’s refers to the district’s debt load as “elevated but manageable.”

“In summary, because of healthy reserves, we entered a period of extreme fiscal challenges for school districts well-positioned to preserve programs and opportunities for students,” said Assistant Superintendent for Business Matt Bourgeois. “At this point, we are continuing to navigate this difficult period, and we have a plan to restore our reserves and ensure a sustainable course for the future. In terms of our debt, as a community we have invested in a necessary renovation of our facilities. We continue to have strong credit ratings from both of the major agencies, even as this change reflects the fact that we do have challenges.”