Fitch Rates Louisiana GOs 'AA-'; Upgrades Outstanding GOs

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA-' rating to $200 million State of Louisiana general
obligation (GO) bonds, series 2009-A and $124,780,000 GO refunding bonds, series
2009-B, scheduled to sell competitively on Oct. 27, 2009. Simultaneously, Fitch
upgrades approximately $2.5 billion in outstanding GO debt to 'AA-' from 'A+'.
Fitch also upgrades to 'A+' from 'A' the ratings on the state
appropriation-backed bonds listed at the end of this release. The Rating Outlook
is Stable.

The upgrade to 'AA-' from 'A+' reflects the strong financial management
demonstrated by the state in recent years. Most recently, the state acted to
maintain budget balance and sizable reserves over the course of fiscal 2009 and
in budgeting for fiscal 2010 as economic and revenue performance weakened. The
current rainy day fund balance of $768 million represents about 9.5% of fiscal
2010 general fund tax, license and fee revenue. Although Louisiana's economy
remains concentrated in the volatile energy industry, Fitch recognizes the
state's record of conservative revenue estimating in recent years and believes
that the state's reserve position and focus on spending control support its
ability to deal with future shortfalls. State debt levels remain moderate, while
the funding of the state's two largest pension systems is below average. There
are strong legal provisions for GO debt, with all nondedicated revenues flowing
into the bond security and redemption fund to provide first for debt service.

With prudent fiscal management following the devastation caused by Hurricanes
Katrina and Rita in 2005, the state maintained sizable financial balances and
realized exceptionally strong revenue collections, bolstered by high oil & gas
and hurricane recovery-related revenues. State revenues are now returning to
more normal baseline levels, and recent revenue declines also reflect the impact
of the economic downturn and significant tax cuts enacted in prior years.
Revenue forecasts for fiscal 2009 were reduced mid-year, which the state
addressed through expenditure reductions. After several years of large operating
surpluses, which were used for one-time purposes, fiscal 2009 is now projected
to have ended in balance, with general fund revenues down 8% from the prior
year.

The general fund budget for fiscal 2010 is based on a revenue estimate of $8
billion, $1.3 billion, or almost 14%, below fiscal 2009. All major revenue
sources are projected to decline, with sales taxes forecast down 8%, personal
income taxes 9.7%, mineral taxes 24.2%, and corporate taxes 36.8%. The budget
was balanced with $688 million in federal stimulus funds that support ongoing
general fund expenditures, additional spending cuts, and use of $86 million from
the state's rainy day fund as well as about $105 million in other fund balance
transfers. The remaining balance in the rainy day fund equals about 9.5% of
fiscal 2010 general fund tax, license and fee revenue, and receipts from a tax
amnesty program will be applied to replenishing the fund in fiscal 2010.
Revenues reportedly are in line with forecasts through September 2009. The state
has created a government streamlining commission to develop options to address
large projected gaps in fiscal 2011 and beyond, and is reviewing fund
dedications to identify possible monies that could be made available on a
one-time and/or ongoing basis for the general fund.

Louisiana's economy is resource-based as a major producer of oil and gas, and
much of its manufacturing is also based on petroleum and chemical production.
Tourism is also important, and the port system among the largest in the world.
Following the 2005 storms, state employment dropped in 2005 and 2006; however,
growth at above the national rate was recorded in 2007 and employment rose to
above pre-Katrina levels in 2008. As the national economy slowed in 2008,
Louisiana continued to add jobs through March 2009. State employment has dropped
in recent months, with August 2009 down 1.7% compared to August 2008.
Louisiana's unemployment rate has been well below that of the U.S. since the
2005 storms and remains so at 7.8% in August 2009, although it is up sharply.
The state's personal income declined 9.4% in 2005, but has risen significantly
since, and personal income per capita was 91% of the U.S. level in 2008, ranking
30th of the states. This is a high level for Louisiana and reflects the impact
of hurricane recovery. The state has had some recent success with economic
development efforts that support diversification.

Before Hurricanes Katrina and Rita, the 1.3 million people residing in the New
Orleans metropolitan area made up nearly 30% of the state's population and about
one-third of state employment. Following the hurricanes, there were large
population losses in New Orleans and some growth elsewhere in the state. The
current population of the New Orleans metropolitan area is estimated to be about
88% of pre-storm levels. Flood protection in the New Orleans area has been
enhanced; however, the state remains vulnerable to severe storm activity.

State debt levels remain moderate, equaling 3.7% of personal income. By policy,
debt issuance is well controlled. Funding of the state's two largest pension
systems is below average at 67.6% (state employees) and 70.2% (teachers) as of
June 30, 2008.

In conjunction with the rating action on Louisiana's GO credit, the following
state appropriation-supported bonds are upgraded to 'A+' from 'A':

--England District Sub-District No. 1 revenue bonds series 2005 (Union Tank Car
Co. Facility);

--Board of Commissioners of the Port of New Orleans-Special Project revenue
bonds series 2005 (State/CG Railway, Inc. project);

--Louisiana Public Facilities Authority revenue refunding bonds series 2002
(Medical Center of Louisiana at New Orleans-University Hospital Facility);

--Louisiana Public Facilities Authority (LA) (Hurricane Recovery Program)
revenue bonds series 2007;

--Industrial Development Board of the City of New Orleans, Louisiana, Inc. State
of Louisiana annual appropriation obligation revenue bonds (New Orleans Federal
Alliance Project) series 2008.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE.

Fitch Ratings, New York
Laura Porter, 212-908-0575
Richard Raphael, 212-908-0506
or
Media Relations:
Brian Bertsch, 212-908-0549
Email: brian.bertsch@fitchratings.com
Sandro Scenga, 212-908-0278
Email: sandro.scenga@fitchratings.com

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