Fitch Revises Outlook for New York State GO & Related Debt to Positive from Stable.

NEW YORK -- Fitch revises the Rating Outlook on State of New York general obligation (GO) bonds to Positive from Stable. The 'AA-' rating on approximately $3.3 billion outstanding state GO bonds is affirmed. Most of New York State's debt is in the form of public authority bonds supported by legislative appropriations, whether in the form of leases, contract payments, or dedicated funds. The Rating Outlooks on such commitments are revised as well, as listed below.

The improvement in the Rating Outlook reflects the state's steady economic growth and robust revenue performance following severe stress earlier in this decade. The practice in recent years of retaining surplus revenues to offset projected future funding gaps continues, and gap forecasts have remained at more manageable levels. Although the fiscal 2008 enacted budget includes several new programs that entail significant and rising spending commitments, programs are directed towards school funding and property tax relief, longstanding pressures. The budget also includes long-sought savings in health care spending as well as new corporate tax revenues.

The Rating Outlook indicates the direction a rating is likely to move over a one to two-year period. Fitch believes that in the last few years the state has taken steps to bolster its financial position in anticipation of future downturns. While there is exposure to Wall Street performance, revenue forecasts appear reasonable and the state has a proven willingness and capacity to raise taxes, as temporary sales and income tax surcharges raised during the recession have expired. In addition, the creation and initial funding, albeit small, of a new rainy day reserve is a positive rating factor. Credit improvement will depend on continued positive financial trends.

The state's 'AA-' rating recognizes New York's substantial wealth and resources and broad economy, somewhat tempered by uneven performance across the state. Net tax-supported debt levels (currently 5.5% of 2006 personal income) have been relatively stable and are expected to remain above average but still in the moderate range. Pensions are well funded. Financial performance has been strong, benefiting from robust revenue growth tied to the cyclical financial services and real estate sectors.

Fiscal 2006 ended with a $2 billion surplus, after prepayments. With continued strength in personal income and business tax receipts, fiscal 2007 closed with a $1.5 billion surplus (before timing-related adjustments) and tax base revenue growth of 12.8%, the third straight year of base growth above 10%. Fiscal 2007 ending reserves totaled about $3.6 billion (before timing-related adjustments), including $787 million in retained fiscal 2006 surplus, the $1.5 billion fiscal 2007 surplus, and $1 billion in the tax stabilization reserve. The enacted budget for fiscal 2008, which began on April 1, results in projected ending reserves of $3 billion, including $1.2 billion in retained fiscal 2007 surplus and $175 million in the new rainy day fund. Base tax receipt growth is forecast at 7.8% for fiscal 2008.

In conjunction with the rating action on New York's GO credit, the Rating Outlook on the following state tax-supported bonds (about $45 billion outstanding) is revised to Positive from Stable:

State personal income tax (PIT) revenue bonds 'AA-', issued by:

--Dormitory Authority of the State of New York (DASNY);

--Empire State Development Corporation/Urban Development Corporation (ESDC/UDC);

--New York Environmental Facilities Corporation (EFC);

--New York State Housing Finance Agency (HFA); and

--New York State Thruway Authority.

New York Local Government Assistance Corporation (LGAC) bonds 'AA-'.

New York City Sales Tax Asset Receivable Corporation (STAR) sales tax asset revenue bonds 'AA-'.

New York State Thruway Authority highway and bridge trust fund bonds 'AA-'.

New York State appropriation debt (state lease, state service contract, certificates of participation, etc.) 'A+', issued by:

--State of New York;

--Dormitory Authority of the State of New York (DASNY);

--Empire State Development Corporation/Urban Development Corporation (ESDC/UDC);

--New York State Energy Research & Development Authority (NYSERDA);

--New York Environmental Facilities Corporation (EFC);

--New York State Housing Finance Agency (HFA);

--Metropolitan Transportation Authority (MTA); and

--New York State Thruway Authority.

Dormitory Authority of the State of New York (DASNY) school districts revenue bond financing program 'A+'.

New York City Transitional Finance Authority (TFA) building aid revenue bonds 'A+'.

State of New York Municipal Bond Bank Agency (MBBA) special school purpose revenue bonds (prior year claims) 'A+'.

Tobacco Settlement Financing Corporation (State of New York) asset-backed revenue bonds (state contingency contract secured) 'A+'.

Dormitory Authority of the State of New York (DASNY) court facilities lease revenue bonds (City of New York issue) 'A'.

Dormitory Authority of the State of New York (DASNY) lease revenue bonds (State Judicial Institute at Pace University) 'A'.

For more information, see Fitch Research on the 'State of New York,' dated Jan. 23, 2007, available on Fitch's web site at www.fitchratings.com.

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.