(Clarifies in paragraph six to reflect projection by district report, not rating agency.)
* Agency has negative outlook on district
* Rating could be lowered if district's finances weaken
SAN FRANCISCO, Sept 6 Standard & Poor's Ratings Services cut its underlying rating on Thursday on the Inglewood Unified School District by two notches to BBB-minus due to uncertainty over the California district's finances and warned of further potential downgrades.
S&P in a statement said it has a negative outlook on the Los Angeles-area school district as it may fail to tackle a budget gap and may not accept a bail-out from California's government.
"We could lower the rating if the district's finances were to weaken because of insufficient liquidity for operations," said S&P credit analyst Lisa Schroeer.
"We, however, could revise the outlook to stable if the district were able to adjust its finances and place itself on a path toward achieving long-term structural balance and sufficient liquidity," Schroeer said in the statement.
California lawmakers approved a bill last week that would allow Inglewood's school district to borrow up to $55 million from state-guaranteed funds. The loans would be repaid over 20 years. By accepting the money, the state superintendent of public instruction would appoint an administrator to assume control of the school district.
The statement noted that a district financial report assumes state funds for school districts will be tight. The district report assumes voters will reject a measure on California's November ballot seeking to increase the state's sales tax and income tax rates on wealthy Californians.
Governor Jerry Brown is campaigning for the measure, which would raise revenue to prevent planned cuts to education spending over the near term and to bolster California's budget in coming years. (Reporting by Jim Christie; editing by Bob Burgdorfer and Jeffrey Benkoe)