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CALIF. PUBLIC WORKS BOARD $375 MIL BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, July 15 /PRNewswire/ -- The State Public Works Board of the State of California's $375 million (approximately) Lease Revenue Refunding Bonds (The Regents of the University of California) 1993 Series A (Various University of California Projects) are rated 'A+' by Fitch. The credit trend is uncertain. The bonds will be sold through negotiation by a syndicate led by Reinoso & Co., Inc. on or about July 20. The 'AA' rating on $17.6 billion in state general obligation debt is affirmed and its credit trend remains uncertain.
 The overall strength of the University of California system and the leased facilities' integral role in its academic programs, as well as the strong legal features, provide assurance of rental payment. California's long-term credit prospects have weakened, as the recession continues to be deeper than expected and financial operations continue to deteriorate. The uncertain trend reflects the economy's unclear course, as well as the state's as yet unproven ability to realize its budget forecasts.
 Bond proceeds will be used to refund portions of four issues sold for projects leased to the University of California. The leased facilities and equipment are integral to the university. While the aggregate lease rental payment for all outstanding issues recently rose substantially, the payments remain within the means of the university and the state. Legal provisions in the leases and indenture are strong, and the Regents pledges to use all lawfully available funds to make rental payments, including state appropriations, which are its largest revenue source. However, the Regents' ability to pay rent is not contingent on the state's budget enactment; twice recently the Regents made lease payments when the state had not enacted a budget. State funding has decreased, and the university responded with sizable fee and tuition increases and expenditure cut. Despite the recent declines, state appropriations make up about one-third of the system's operating funds.
 California closed 1992-1993 with a deficit of about $2.7 billion, or, if loans to school districts (made off budget) are included, $3.7 billion. The original budget had envisioned that the deficit could be retired from current revenues but actual operations were about in balance, carrying the entire beginning deficit forward and adding a little to it. The state has now fully recognized the deficit and plans to retire it over 18 months, although still from current revenues.
 The state budget for 1993-94 is considerably below that for 1992-93, with the major change resulting from a $2.6 billion shift in property taxes from local governments to schools. An operating surplus of $2.1 billion is expected, which would eliminate $1.6 billion of the deficit. Under the state's plan, the remaining surplus would be carried forward and, together with the projected operating balance in 1994-95, would be used to repay the final $1.2 billion of the deficit. The 1994-95 portion is only a plan; it must be incorporated into that year's budget, which will be considered in 1994.
 Revenue estimates for 1993-94 appear more reasonable than in the last few years, and results in recent months are on target with revised estimates. While the economy appears to be stabilizing, achievement of revenues remains a vulnerability. The major challenge to the state is to keep expenditures within the plan to enable sufficient operating surplus for deficit retirement.
 -0- 7/15/93
 /CONTACT: Amy S. Doppelt, 212-908-0514, or Claire G. Cohen, 212-908-0552, both of Fitch/


CO: California Public Works Board ST: California IN: SU: RTG

TM -- NY109 -- 2274 07/15/93 18:40 EDT
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Date:Jul 15, 1993
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