California $500M GOs Rated `AA-` by Fitch IBCA.

NEW YORK--(BUSINESS WIRE)--Oct. 14, 1999--

California's $500 million general obligation bonds, for bids on Oct. 20, are rated `AA-` by Fitch IBCA. In addition, the `AA-` rating assigned to $20.1 billion outstanding general obligations is affirmed. The new bonds are due Oct. 1, 2000-29 and will be callable beginning Oct. 1, 2009, at 101%.

The rating takes into account the fundamental strengths of California, buttressed by the extent of economic recovery and the return of fiscal stability. Rather than slowing down as expected, the state's economic expansion has regained strength. Both employment and personal income are showing good growth, with increases of 3.5% and 6.1%, respectively, in 1998. Similar gains are expected in 1999, with slowing in 2000. State personal income growth was faster than in the nation in both 1997 and 1998, reversing the trend shown in 1991-96 and on a per capita basis, the state's gains have matched or exceeded the U.S. for three consecutive years.

The economic resurgence was reflected in the May revisions that form the basis for the budget for 1999-2000. Revenues were upwardly revised by about 2.9% for 1998-99 and 4.5% this year, mostly due to expected performance of the personal income tax. The new estimates provided about $4.3 billion additional revenue: $1.6 billion in 1999 and $2.7 billion in 2000. The general fund at June 30, 1999 had a balance of $2.4 billion, including $1.9 billion in the reserve. Revenues for 1999-2000 are expected to increase about 8.7%, with the personal income tax yield rising 7.9%. Expenditures are up by a like amount, creating a draw of $742 million from the opening balance. At year end a balance of $1.7 billion is projected, including $880 million, or 1.4% of revenues in reserves, and an additional $300 million set aside for employee compensation and litigation. Some $1.7 billion of expenditures are classified as one-time, including $425 million for the state infrastructure bank so that the operating deficit is not automatically ongoing. Revenues in the first quarter of 1999-2000 were up 11.2% over the comparable prior year period, some 2 percentage points above the August estimate, led by personal income tax growth of 3.2% above estimates. California's stronger financial position is also reflected in the reduction of operating borrowing, down from $1.7 billion to $1.0 billion.

The state's debt position continues to be favorable, with net tax-supported debt of about $25.1 billion, or $795 per capita and 2.8% of personal income, both very moderate ratios. California will have some $12.3 billion general obligation bonds authorized but unissued after this sale, mostly representing the remaining $8.4 billion from the $9.2 billion school bonds approved by the voters in 1998, of which $688 million are outstanding and $120 million are now offered.