Amend: Fitch Rates Connecticut's $450MM GOs 'AA'.

NEW YORK -- (This is a revised version of a press release that was originally published yesterday. The callable information on the new bonds in the second paragraph has been amended accordingly.)

Fitch Ratings has assigned the following ratings to the general obligation (GO) bonds listed below for the State of Connecticut (the state):

-- $300 million GO bonds, 2006 series D 'AA';

-- $150 million GO refunding bonds, 2006 series E 'AA'.

The 2006 series D bonds are due Nov. 1, 2008, 2012-2015, 2019, and 2022-2026. The 2006 series E refunding bonds are due June 15, 2007 and Dec. 15 2008-2022. Both series are scheduled to sell via a syndicate led by Lehman Brothers on Oct. 25. Call provisions for both series have yet to be determined. Fitch also affirms the 'AA' rating on $9.3 billion outstanding GO bonds. The Rating Outlook is Stable.

Connecticut's wealth and economic resources continue to support the state's high credit quality, and state finances have exhibited considerable strength in recent years. Nonetheless, the state maintains a high level of net tax-supported debt relative to other states. Connecticut ranks first among the states in per capita personal income, at 138% of the U.S. level. Employment is increasing, but has trailed U.S. growth rates since the recession and remains below the pre-recession peak. Employment rose 0.8% in 2005, compared to 1.5% for the U.S. August 2006 employment is up 0.6% over August 2005. Service sector employment growth has been strong, with education and health up 1.7% and professional and business services up 1.4%. Manufacturing continues to decline, down 0.5%.

Recent financial performance has been very strong. Fiscal year 2006 net tax collections of $11.2 billion rose 8.9% over fiscal 2005 figures, and exceeded original budget estimates by 7.3%. Growth was driven by collections of personal income tax, up 10.5%, and corporation tax, up 16%. The fiscal 2006 year-end surplus is now estimated at $446 million; deposit of these funds into the budget reserve will bring its balance to $1.1 billion, or 7.5% of general fund appropriations. The statutory ceiling was raised to 10% of general fund appropriations in 2003.

The state's fiscal year 2007 revised budget, passed in April, included reductions of $251 million to general fund revenues. Tax cuts and credits totaled $148 million, including early sunset of the corporate business tax surcharge enacted in the last recession. Net revenues nonetheless were projected to rise 0.3%, to $11.3 billion, with growth in personal income taxes of 4.4%. Expenditures were budgeted to grow 2.3%. The legislature also dedicated $246 million in fiscal 2006 surplus funds to address teacher pension system underfunding and $86 million to paying off the remaining deficit notes issued during the recession. In spite of higher pension contributions, Connecticut pension underfunding remains a pressing concern, with 2004 funding levels at 55% for state employees and 65% for teachers.

Debt levels are high, at 8.2% of 2005 personal income and $3,908 per capita, including planned issuance of bonds. Amortization of GO debt is rapid, with 70% paid in 10 years. Debt levels are expected to remain high; after approving a significant transportation infrastructure program last year, the legislature this year approved a 10-year transportation plan, including $1.3 billion in new debt funded in part by transfer of the oil companies' tax. The new plan will establish a commuter rail link between New Haven and Springfield, Massachusetts and fund other statewide rail and road improvements.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.