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CALIFORNIA $16.2 BILLION GENERAL OBLIGATION BONDS LOWERED TO 'AA+' BY FITCH -- FITCH FINANCIAL WIRE --

CALIFORNIA $16.2 BILLION GENERAL OBLIGATION BONDS LOWERED TO 'AA+' BY
 FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, Feb. 14 /PRNewswire/ -- The State of California's general obligation bond rating is lowered to "AA+" from "AAA" by Fitch. The action affects $16.2 billion in bonds and is taken in connection with the offering of $1.39 billion general obligations on Feb. 19. The new bonds will mature Sept. 1, 1993-2012 and are not callable.
 California again faces a considerable financial problem, with revenues for 1991-92 now expected to be 6 percent-7.5 percent below original estimates. The general fund deficit is estimated to be between $1.3 billion and $2.3 billion at June 30, 1992, and its resolution will be incorporated into the budget for 1992-93. The governor submitted a budget which provided for expenditure control and deficit elimination, but it now appears that revenues over the next 18 months have been overestimated.
 The financial problem has developed even though major balancing actions were taken last year. It is a direct result of the recession, which has been harsher and longer than anticipated, with a decline in employment estimated at nearly 5 percent by the state. Recovery, not expected until at least mid-1992, is likely to be only moderate, unlike earlier recovery periods, hampering the opportunity for revenues to increase rapidly enough to enable the state to grow out of its financial problems.
 The magnitude of the budget problem, with the estimated deficit at the end of 1991-92 representing a range of 3-6 percent of estimated revenue and the uncertainties surrounding the economy in 1992-93, when it must be addressed, diminish security for California's bonds.
 The ratings assigned to lease debt of the state, issued by the State Board of Public Works, the East Bay State Building Authority, and the Los Angeles State Building Authority are not affected by the general obligation rating change, and remain at "AA."
 -0- 2/14/92
 /CONTACT: Claire G. Cohen of Fitch, 212-908-0552/ CO: State of California ST: California IN: SU: RTG


SH -- NY050 -- 0263 02/14/92 14:12 EST
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Publication:PR Newswire
Date:Feb 14, 1992
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