Fitch Rates Texas State University System's 2010 RFS Bonds 'AA-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings assigns an 'AA-' rating to the following Board of Regents, Texas
State University System (TSUS, or the system) revenue financing system (RFS)
bonds:

--$95,011,000 RFS refunding bonds, series 2010;

--$20,195,000 RFS revenue bonds, series 2010A.

In addition, Fitch affirms the 'AA-' rating on TSUS's approximately $579 million
of outstanding parity RFS bonds.

The Rating Outlook is Stable.

Fitch will recalibrate the ratings on the above referenced bonds on April 30,
2010 as described in the March 25, 2010 report 'Recalibration of U.S. Public
Finance Ratings', available at 'www.fitchratings.com'. At that time, the ratings
will be revised as described below.

--The rating on the series 2010 RFS refunding bonds will be revised to 'AA' with
a Stable Rating Outlook.

--The rating on the series 2010A RFS revenue bonds will be revised to 'AA' with
a Stable Rating Outlook.

--The rating on the outstanding RFS bonds will be revised to 'AA' with a Stable
Rating Outlook.

The series 2010 bonds are expected to sell on April 13, 2010 via negotiation.
The series 2010A bonds are expected to sell on or after the week of April 26,
2010.

RATING RATIONALE:

--TSUS maintains a healthy financial position, evidenced in part by its
consistently positive operating margins.

--Operating revenues benefit from continued sound growth in system-wide
enrollment.

--Typically consistent operating support from the state is under pressure in the
current biennium, given the broader challenging economic environment.

--A solid, but moderating financial cushion could be pressured by TSUS's
substantial capital improvement plan (CIP), a significant portion of which will
be debt-financed.

KEY RATING DRIVERS:

--Continued positive operating margins supported by steady enrollment growth at
TSUS member institutions.

--Alignment of future new money debt issuance with commensurate increases in
financial resources, including state appropriations.

SECURITY:

RFS debt is secured by pledged revenues which include all legally available,
unencumbered funds and balances of TSUS.

CREDIT SUMMARY:

TSUS' healthy operating margins demonstrate its sound financial position.
Operating margins have registered over 5% in each year since fiscal 2004,
including a 5.9% result in fiscal 2009. Solid results are due in part to the
system's conservative budgeting practices, which include assuming no annual
growth in student enrollment. Student-generated revenues and state
appropriations are the system's primary revenue sources; reliance on
student-generated revenues has increased over the last five years (to 44.6% from
41% in fiscal 2005), while reliance on state appropriations has declined
slightly (to 32% from 37.1% in fiscal 2005).

Steady gains in enrollment have been a key driver of revenue growth in recent
years. Full-time equivalents increased an average of 3.9% annually since fall
2007, and officials note that the system's competitive pricing continues to
attract new students. The majority of TSUS's member institutions charge tuition
and fees below the statewide average for public universities. TSUS sets a soft
cap on annual tuition and fee increases of 5% and 2.5%, respectively.

The system's financial cushion remains solid, but has moderated in recent years,
especially with respect to its outstanding long-term debt. Fiscal 2009 available
funds (calculated by Fitch as cash and investments that are not restricted) of
$396.9 million equaled 54.8% of debt, down from a high 87.6% in fiscal 2005.
Available funds may be further pressured, as TSUS plans to issue approximately
$800 million of additional revenue bonds over the next five years to support its
$1.2 billion CIP. However, half of planned debt is expected to be issued as
tuition revenue bonds (TRBs), and TSUS expects to receive an increase in its
state appropriation equal to the debt service on the bonds. In the event TRBs
are not approved, TSUS will defer or delay capital projects until funding
becomes available.

TSUS, created in 1911, is the oldest university system in Texas. Texas State
University - San Marcos, the largest member institution, accounted for
approximately 42.7% of the system's 72,172 enrolled students in fall 2009. State
Representative Brian McCall was recently named as the sole finalist for the
position of Chancellor of the Texas State University System.

Applicable criteria available on Fitch's web site at 'www.fitchratings.com'
include:

--'College and University Rating Criteria', dated Dec. 31, 2009.

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

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Fitch Ratings, New York
Ryan A. Greene, 212-908-0315
Douglas J. Kilcommons, 212-908-0740
or
Media Relations:
Cindy Stoller, 212-908-0526
Email: cindy.stoller@fitchratings.com

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