Correction - Fitch Rates Colorado's $145MM Education Loan Tax & Rev. Antic. Notes 'F1+'.

SAN FRANCISCO -- (This is a correction to the release of June 30, 2006; the correct series is 2006A).

Fitch rates the State of Colorado's $145,000,000 education loan tax and revenue anticipation notes series 2006A 'F1+'. The notes will be sold competitively on July 6 and will mature Aug. 3, 2007. The state's financial advisor for the notes is RBC Capital Markets.

The 'F1+' rating reflects the education loan tax and revenue anticipation notes' (ETRANs) strong security, payable from individual school districts' loan repayments and by the state treasurer's covenant to use substantial identified resources to purchase defaulted district loans, if any, as an investment. These and other structural features significantly enhance credit quality. Also, a significant share of the loan amount is borrowed by school districts with good credit quality. A larger, second borrowing is expected in December 2007, which will make additional loans to districts and will be secured on par with the series A notes. The second borrowing is projected to be as high as $325 million, although the amount will depend on the districts' cash flow experience for the first six months of their fiscal year, and the results of tax override elections in November.

Note proceeds will be used to make interest-free loans to qualifying school districts to assist with the districts' cash flow. The loans are made under a program managed by the state treasurer, retaining safeguards that protect credit quality incorporated for the first time two years ago. The program includes eligibility requirements, monitoring throughout the year, and enforcement measures to minimize non-payment risks.

Each district covenants to repay its loan by remitting property taxes received after March 1, 2007 to the state treasurer one day after receipt from the county treasurer. Loan repayments are for principal only, although the loans will bear interest once a district defaults. Note interest will be pre-funded from state general fund resources at closing. Most of the district loan repayments will be made in March, May, and June, coincident with statewide property tax collections. The districts are expected to borrow from 8%-60% of their expected tax levy through the two state note issues, with the higher amounts borrowed by the largest districts. The state expects 15 districts to borrow proceeds from both this issuance and the December sale, with eight other districts being involved with the later sale. These 23 districts include seven that did not participate in last year's note sale.

All district loan repayments are due by June 26, 2007, well in advance of the notes' Aug. 3 maturity. At that time, any non-payment constitutes default by the district, and the loan begins to bear interest. Under the state's note authorizing resolution, if, on June 27, the amount in the loan repayment account together with the pre-funded interest account is not sufficient to fully provide for the ETRAN repayment, the state treasurer covenants to provide the shortfall amount using any funds in his custody available for investment. The state has considerable resources available for such investment, including the State Education and Highway Funds. These two funds are expected to equal about $662 million on June 30, 2007. These resources are distinct from those available for borrowing to repay the state's own cash flow notes. Funds that could be used to repay $650 million in Colorado's general fund tax and revenue anticipation notes (GTRANs) on a priority basis also are available for investment if two funds mentioned above are not sufficient. These other funds are projected to total $2.8 billion at June 30, 2007, well covering both GTRAN and ETRAN issues.

These notes' credit quality benefits from changes implemented in 2003, including granting the state treasurer right to reject a district's loan application, set the loan amount, and control the amount and timing of each district's periodic drawdowns. The law also requires each district's superintendent and board to authorize the loan, with the authorization codifying the loan repayment procedure. Also, each district must provide update reports to the treasurer throughout the borrowing year. The treasurer also requires verification of a cash shortage before approving a draw.

The five largest participating school districts are expected make up 87% of the total district borrowings. These districts are among the state's largest, and have a Fitch rating or evaluation showing good credit quality. Of the remaining 19 districts participating in the loan program, no one represents more than 4%. The cash flows demonstrate each district's ability to fully repay the loan, with four of the five largest district borrowers anticipated to be fully repaid at least one month ahead of the June 26, 2007 due date. The largest borrower, Denver School District No. 1, is expected to use just under one-half of the note proceeds, and will repay the full amount by June 20, more than one month ahead of the note repayment date.

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.