TEXT-Fitch rates Georgia general obligations 'AAA'
Dec 6 - Fitch Ratings has assigned an 'AAA' rating to $583 million in state of Georgia general obligation (GO) bonds, consisting of the following: --$234.915 million GO series 2013A; --$57.99 million GO refunding series 2013B (federally taxable); --$290.575 million GO refunding series 2013C. Precise par amounts for the GO refunding series 2013B and 2013C will be determined at the time of sale. The bonds will sell via competitive bid, with refunding series 2013C selling on Dec. 11, 2012 and series 2013A and refunding series 2013B selling on Dec. 12, 2012. Fitch also has affirmed the ratings of outstanding state GO and related bonds of the state as detailed at the end of this release. The Rating Outlook is Stable. SECURITY The bonds are general obligations of the state of Georgia, secured by a pledge of the state's full faith and credit. KEY RATING DRIVERS --LOW DEBT: The state's debt burden is on the low end of the moderate range, and overall debt management is conservative. Amortization of principal is rapid. The state fully funds its annual required contributions for pensions. --FISCALLY CONSERVATIVE: The state has a long history of conservative revenue estimation and balanced operations, and has consistently taken timely action to address fiscal weakness. After several years of recession-related fiscal challenges, the state is making progress in rebuilding balances. --DIVERSIFYING ECONOMY: Despite an uneven economic recovery, the state's economy has grown rapidly and diversified over time. CREDIT PROFILE The longstanding 'AAA' rating and Stable Outlook on Georgia's GO bonds reflect its conservative debt management, a proven willingness and ability to support fiscal balance, and a diversified economy. The state took repeated action during the recession to maintain fiscal balance through steep spending cuts, use of federal stimulus, and draws from its rainy day fund, the revenue shortfall reserve (RSR). Since then it has maintained a conservative approach to fiscal management, curbing spending growth and making progress in rebuilding the RSR balance. The state's debt profile is conservative and its debt burden is moderate as a percentage of personal income, with rapid amortization of principal. Most of the state's tax-supported debt is in the form of GO or guaranteed revenue bonds, and amortization of principal is rapid, with more than 70% maturing within 10 years. Other outstanding obligations include $1.2 billion in grant anticipation revenue (GARVEE) bonds and capital leases. Including the current sale, debt ratios remain moderate at 3% of 2011 state personal income. Debt management includes policy targets for outstanding debt by personal income and per capita, as well as debt service to prior year receipts. The state's major pension systems covering both state employees and teachers have benefitted from consistent funding of annual required contributions. As of the June 30, 2011 valuation, system-wide funded ratios for the state employees and teachers plans were reported at 76% and 84%, respectively. Using Fitch's more conservative 7% discount rate assumption, the state employees' and teachers' plans would be funded at 72.1% and 79.6%, respectively as of June 30, 2011. On a combined basis, the state's net tax-supported debt and Fitch-adjusted unfunded pension liability attributable to the state would total 4.8% of 2011 personal income, below the median for U.S. states rated by Fitch. The state's diversified economy has grown rapidly over time, with its largest metro area, Atlanta, positioned as a key business center and transport hub. The recession was more severe in the state than the nation overall and a return to growth remains uneven, with overall gains tempered by ongoing weakness in certain sectors, including construction. Between 2007 and 2010, employment declined 7.3% in the state, more severe than the 5.6% employment loss recorded nationally during the same period. Unemployment also rose rapidly, to 10.2% in 2010, from 4.6% in 2007. After slowing in the spring of 2012, state employment growth has accelerated in recent months, with a year-over-year gain of 1.7% in October 2012, compared to a 1.4% gain nationally. Unemployment remains elevated, at 8.7% in October 2012 compared to 7.9% nationally. The state's quarterly personal income rose 3.4% on an annual basis in the second quarter of 2012, compared to 3.3% nationally. Personal income per capita equaled 86.6% of the U.S. level in 2011, ranking Georgia 39th among the states. Georgia has a demonstrated commitment to budgetary balance and maintaining flexibility in the form of RSR balances. Strong revenue performance through fiscal 2007 enabled the RSR balance to reach $1.5 billion (8.2% of net revenues) by fiscal year 2007. Revenues faltered between fiscal 2008 and fiscal 2010, requiring allotment holdbacks and spending cuts, use of federal stimulus and draws from the RSR to ensure continued balance. Although drawn down to a low of $103.7 million (0.62% of net revenues) in fiscal 2009, spending restraint and conservative revenue estimating has elevated the preliminary fiscal 2012 RSR balance to $350.1 million (2% of net revenues), net of the expected mid-year school funding draw and before accounting for fiscal 2012 lapses. Georgia's financial performance in fiscal 2012, which ended on June 30, was similar to forecast expectations. Given the expiration of federal stimulus funds at the end of fiscal 2011, the adopted fiscal 2012 budget anticipated modest tax revenue improvement while implementing 7% agency spending reductions to ensure balance. Actual general fund tax revenues rose 4.4% over fiscal 2011 figures, to $16.1 billion, roughly on target with the tax revenue growth anticipated in the state's spring 2012 amended budget. Personal income tax collections were stronger than forecast, partly offsetting weaker corporate tax receipts. Fiscal 2012 appropriations rose 2.4% over fiscal 2011, to $18.5 billion. The state is maintaining a cautious approach to finances in fiscal 2013 given broader economic uncertainty. The fiscal 2013 budget, adopted in March 2012, assumed tax revenue growth of 5.3%, to $17 billion, a figure which incorporated a net $49 million in tax law changes that lower collections. Total revenues available for appropriation rise 4.5%, to $19.3 billion. Actual fiscal 2013 tax revenues year to date through October have grown 4.4% over the prior year, less robustly than expected. Total fiscal 2013 appropriations are budgeted to grow 4.6% from fiscal 2012, to $19.3 billion. The governor has requested, and agencies are implementing fiscal 2013 spending reductions of 3%, excluding education. The legislature is expected to approve these reductions in the amended budget and maintain them in fiscal 2014 budgeted spending. The state continues to assume modest economic and revenue growth going forward. In addition, Fitch has affirmed the following: --Approximately $9 billion in outstanding state GO and guaranteed revenue bonds, at 'AAA'; --Approximately $35 million in Development Authority of Clayton County revenue bonds (TUFF Archives LLC-Secretary of State of Georgia Project), series 2012, at 'AA'. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria' (Aug. 14, 2012); --'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012). Applicable Criteria and Related Research: Tax-Supported Rating Criteria U.S. State Government Tax-Supported Rating Criteria
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