OREANDA-NEWS. S&P Global Ratings has lowered its rating on Cook County Community College District No. 527 (Morton College), Ill.'s general obligation (GO) bonds and GO limited tax bonds outstanding to 'AA-' from 'AA'. The outlook is negative.

"The downgrade reflects the declining reserves after reduced state revenue in fiscal 2016, coupled with the risks should the state fail to adopt a full fiscal 2017 state budget or appropriate additional funds for community college districts," said S&P Global Ratings credit analyst Jessica Akey. In our opinion, a lack of additional appropriations for fiscal 2017 could weaken the district's financial position through reductions in reserves.

The rating reflects our opinion of the district's: Participation in the deep and diverse Chicago area economy, Very strong reserve levels, andModerate debt with limited future capital needs. In our view, the district's low market value per capita tempers these strengths and its financial position is under pressure due in large part to the State of Illinois' financial stress.

Morton College is less than 10 miles southwest of downtown Chicago. The community college serves roughly 157,000 residents in the Cities of Berwyn, Cicero, Forest View, Lyons, McCook, and Stickney, Ill. Given its location near various modes of transportation, residents have easy access to jobs within the district as well as in the greater metropolitan area. District enrollment tends to follow the typical countercyclical trend. As the economy improves, the district has observed a 3% to 4% drop in headcount in previous years, but according to the college, enrollment is increasing.

The negative outlook reflects the at least one-in-three chance that we could lower the rating within the outlook's one-year timeframe. The outlook further reflects our view of the weakening financial situation in Illinois and that the lack of additional state appropriations could weaken the district's reserves.

We could revise the outlook to stable after the district receives 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 should the district continue to experience significant reductions or delays in state operating appropriations that meaningfully weaken operations and available reserves. We would likely lower the rating if the district reduces its general fund reserves to a level below strong, with no immediate replenishment mechanism after a trend of negative financial operations.