OREANDA-NEWS. S&P Global Ratings revised its outlook to negative from stable and affirmed its 'AA-' rating on Coles-Christian-Clark-Etc. Counties Community College District (CCD) No. 517 (Lake Land), Ill.'s outstanding general obligation (GO) bonds.

"The negative outlook reflects the projected use of reserves and reliance on the working cash fund for liquidity after reduced state revenue in fiscal 2016," said S&P Global Ratings credit analyst Blake Yocom, "coupled with the potential risks should the state fail to adopt a fiscal 2017 budget and no additional funds are appropriated for CCDs." In our opinion, a lack of additional appropriations for fiscal 2017 could weaken the district's financial position and cause liquidity concerns by the end of fiscal 2017.

The outstanding bonds are secured by the district's unlimited ad valorem tax GO pledge. The outstanding series 2016B bonds are alternate revenue source bonds secured by the student service fee established by the board of the district for students attending the colleges, the operations-and-maintenance tax for facilities purposes, the other lawfully available funds of the district, and the unlimited ad valorem property taxes levied on all taxable property in the district to the extent that pledged revenues are insufficient. The rating is based on the unlimited-tax GO pledge, which we view as the stronger security.

The district serves a population estimate of 203,000 over all or portions of 15 counties in southeast Illinois, mainly Coles and Effingham counties. Credit hours decreased 13.7% between 2011 and 2015 to reach 189,767.

"The negative outlook reflects the at least one-in-three chance that we could lower the rating within the one-year timeframe of the outlook," added Mr. Yocom. It further reflects our view of the weakening financial situation in Illinois and the fact that the lack of additional state appropriations could weaken the district's reserves and liquidity position. We could revise the outlook to stable after receipt of regular state operating appropriations for fiscal 2017 that prove sustainable, coupled with a proactive management response leading to stabilized operations and reserves.

We could lower the rating during the one-year outlook period should the district continue to experience significant reductions or delays in state operating appropriations that meaningfully weaken operations and available reserves. We would likely also lower the rating if the district depletes its reserves with no immediate replenishment mechanism after a trend of negative financial operations, leading to potential liquidity concerns, in our view.