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CALIFORNIA $2 BILLION REVENUE ANTICIPATION NOTES RATED 'F-1+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, July 19 /PRNewswire/ -- California's $2 billion 1993-94 Revenue Anticipation Notes (RANs), expected by negotiation on July 21, through a syndicate led by Lehman Brothers, are rated `F-1+' by Fitch. The notes will be due June 15, 1994 and are not callable. The RANs are not general obligations but are payable from unapplied moneys in the general fund, including transfers and internal borrowings as permitted by law.
 The notes now offered will provide operating cash for the current fiscal year. The amount is sharply reduced from last year, in part because $2 billion revenue anticipation warrants (RAWs), issued in June and due in December, remain outstanding and because the general fund budget has been reduced in size. These operating notes are well protected since revenue estimates are reasonable and actual collections since January have tracked estimates. Expenditure control remains necessary. Coverage for the notes is good, at 2.1 times (x). Funds available for coverage include the assumption that the state will issue $1.2 billion RAWs in December 1993 or subsequently, which are planned to remain outstanding until December 1994. Without the RAWs, coverage drops to a still adequate 1.5x. With RAW issuance, the safety margin, which represents the relationship of unused borrowable funds to total cash flow, is 5.5 percent and without them 2.6 percent.
 The 1993-94 budget is part of a two-year plan, although only the first year budget has been legally adopted. Under the plan, expenditures are sharply reduced in 1993-94, with about $1.6 billion of the accumulated $2.7 billion deficit extinguished from the operating surplus. The remainder of the deficit is planned to be eliminated by December 1994. Issuance of RAWs in 1993 is an essential part of the plan, as the proceeds would carry over the 1993-94 fiscal year-end and provide financing until their planned December 1994 maturity. Realization of the plan is aided by the nature of the budget cuts, which include $2.6 billion to be provided by local property taxes rather than state sources, the reduction of cash welfare grants and suspension of a renters' tax credit.
 California's economy remains depressed, with continued employment loss and slow growth in personal income. The budgetary assumptions appear reasonable, expecting that employment will not gain until 1994 and that personal income will follow the present trend.
 -0- 7/19/93
 /CONTACT: Claire G. Cohen of Fitch, 212-908-0552/


CO: State of California ST: California IN: SU: RTG

WB -- NY077 -- 3162 07/19/93 14:49 EDT
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Publication:PR Newswire
Date:Jul 19, 1993
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