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CALIFORNIA'S BUDGET DELAY THREATENS APPROPRIATION OF LEASE PAYMENTS; DEBT SERVICE RESERVES MAY BE NEEDED; PROMPT ACTION REQUIRED

CALIFORNIA'S BUDGET DELAY THREATENS APPROPRIATION OF LEASE PAYMENTS;
 DEBT SERVICE RESERVES MAY BE NEEDED; PROMPT ACTION REQUIRED
 NEW YORK, Aug. 25 /PRNewswire/ -- California's continuing budget delay threatens the state's legal authority to appropriate debt service payments for state lease revenue bonds coming due on Sept. 1. While current discussions with state officials indicate some movement on remaining budget issues, the potential for additional delay past Sept. 1 raises serious concern about reliance on debt service reserve funds for debt service payments. Resorting to reserve funds for debt service would pose serious questions about the state's regard for its lease revenue obligations. Absent a budget, prompt action is imperative to assure debt service payments are appropriated.
 Unlike constitutionally authorized general obligation debt service, which is paid regardless of the status of the budget, the state has no legal continuing authority to appropriate lease revenue debt service. Thirteen series of lease obligations, with principal and interest payments totaling $109,162,459 (listed below) come due on Sept. 1. Two of these, issued by the Public Works Board for the University of California may be paid administratively from other available university funds and will not rely on debt service reserves. All of the remaining issues with exception of one have reserve funds sufficient to provide for the upcoming debt service payment. Of particular concern, however, is the Board of Public Works Energy Efficiency Revenue bonds, Series 1991A, which has no reserve fund.
 Moody's remains in close contact with state officials as they address this problem. At this point, a definitive plan to enable the appropriation of debt service has not been reached, although several options are now being considered. Legislation has been introduced which would permit the state to make debt service payments without an enacted budget. Additionally several existing statutes which may provide the necessary legal authority are being researched by legal counsel. Review of the state's weekly cash flows indicate that if legal authority were forthcoming sufficient funds would be available to make the required payments.
 Given the importance of state lease financing and the significance of maintaining an unblemished payment record. Moody's expects that the Governor, the legislature and all involved parties will set aside their differences in other budgetary areas and act promptly and responsibly to assure timely payment of all debt service obligations.
 State of California lease obligations with debt service payments
 due on Sept. 1:
 California State Board of Public Words Lease Revenue Bonds
 Corrections
 Del Norte Prison dated 2/1/87
 Madera Prison dated 10/1/90
 Corcoran Prison
 1991 Series A (State Prison -- Imperial County) dated 11/1/91
 Higher Education
 California Community Colleges 1991 Series A, dated 8/1/91
 California State University:
 1990 Series A Lease Rental Bonds (Library Facilities)
 University of California
 1988 Series A (Berkeley Campus Life Sciences Facility) (1)
 1990 Series A (Various University of California Projects) (1)
 Other
 Energy Efficiency Revenue Bonds, Series 1991 A (2)
 Energy Efficiency Revenue Bonds, dated 6/1/86
 1991 Series A (Franchise Tax Board Central Office Project
 -- Phase II)
 Los Angeles State Building Authority - DGS lease revenue bonds
 dated 2/1/88
 Department of Transportation to the East Bay
 Building Authority, certificates of participation,
 Series 1991 A and B
 (1) -- Public Works Board bonds issued the University of California will be paid administratively from other available university funds. No reliance on reserve funds is anticipated.
 (2) -- Does not have a reserve fund.
 Total lease revenue bond debt service
 due on Sept. 1: $109,162,459
 Aggregate outstanding principal amount
 of lease revenue bonds with payments
 on Sept. 1 (as of April 1, 1992): $2,167,248,000
 All lease revenues bonds outstanding
 (as of April 1, 1992): $2,880,913,000
 -0- 8/25/92
 /CONTACT: George Leung, 212-553-0342, or James Dearborn, 212-553-1910, both of Moody's/ CO: State of California ST: California IN: SU: RTG


SH-TS -- NY053 -- 3083 08/25/92 14:19 EDT
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Date:Aug 25, 1992
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