Fitch Rates $205.7MM Oregon GOs `AA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 29, 2001

Fitch rates $205,697,676.15 Oregon State Board of Higher Education, general obligation baccalaureate bonds `AA' and affirms the `AA' rating assigned to $2.2 billion outstanding general obligations.

The new bonds, expected during the week of Dec. 3 through negotiation with a syndicate led by Salomon Smith Barney, will include $158,894,178.50 2001 series A, $46,090,540.65 2001 series B and $712,958.65 2001 series C, all due on August 1.

Series A will include $86,065,000 current interest serial bonds due 2002-21, $17,974,177.50 deferred interest bonds due 2006-21 and term bonds, $24,035,000 due in 2026 and $30,821,000 in 2031.

Series B includes $18,375,000 current interest serials due 2003-21, $4,100,540.65 deferred interest serials due 2006-21 and term bonds, $10,340,000 in 2026 and $13,275,000 in 2031.

Series C is mini deferred interest bonds due 2008-12. Deferred interest bonds are not callable; call provisions for current interest bonds are not yet determined; term bonds are subject to mandatory redemption.

Oregon's rating is based on its low level of tax-supported debt and vibrant economic growth over the past decade, which has been reflected in very favorable financial operations. This has helped the state accommodate a mandated shift in school funding as well as maintain large fund balances due largely to continued revenue growth in excess of estimates.

With economic slowing, revenues for the current biennium ending June 30, 2003, are now expected to be below budgetary estimates and balancing measures are being considered. Longer term prospects remain favorable although initiative measures concerning financial matters continue to pose uncertainty.

Oregon's debt burden is low, at $452 per capita and 1.6% of personal income. Self-supporting debt represents about two- thirds of total debt. The new bonds are all for higher education, with series A for self-supporting projects; about $24.5 million is for refunding purposes.

Annual employment growth in 1998-2000 ranged from 1.5% to 1.8%, about half the level of the preceding five years. This year, trends have turned negative, due to the Asian recession and weakening in the technology sector. In October, compared with the same month last year, total employment was down 1.8%, with declines registered in services, trade, construction and manufacturing. The unemployment rate rose to 6.0%.

Operations in 2000-01 resulted in a somewhat lower ending balance than had been expected, due to weakness in corporate taxes. In September, biennial revenues were forecast to be some $300 million below the budget, creating a gap of $211 million to be addressed. There is a risk of a wider gap as the forecast was made prior to the events of Sept. 11. The next forecast is scheduled for December.