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CALIFORNIA PUBLIC WORKS BOARD BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, March 19 /PRNewswire/ -- The State Public Works Board of the State of California's $416.7 million Lease Revenue Refunding Bonds (Department of Corrections) 1993 Series A (Various State Prisons) and $260 million Lease Revenue Bonds (Department of Corrections) 1993 Series B (California State Prison-Fresno County, Coalinga) are rated 'A+' by Fitch. Both series will be sold through negotiation during the week of March 22. The Series A underwriting syndicate will be led by Merrill Lynch & Co; the Series B syndicate by Goldman, Sachs & Co. The credit trend is uncertain.
 The high essentiality of the leased assets, various state prisons for the refunding bonds and a 2,208-bed prison under construction for the Series B debt, and strong legal features provide assuranc ?legislative appropriation and rental payment. Dramatic current and projected prison overcrowding in California is an integral part of the project's essentiality. The rating also is based on the state's long- term credit prospects, as the recession continues to be deeper than expected and financial operations deteriorate. The uncertain trend reflects the economy's unclear course as well as the state's as yet unproven ability to shape financial expectations to prevailing conditions.
 The Series B bonds will finance a 2,208-bed prison, a project that is part of an aggressive prison construction program begun in 1980 to address severe and rising overcrowding. Along with high essentiality, the bonds benefit from strong legal features, including a statute requiring that the first dollars received by the department be used to make lease rental payments. The board has issued debt for prison construction similar to this transaction several times previously, and will refund parts of some of these issues with the Series A proceeds. Prior projects have been built on time and at or under budget.
 California's financial operations continue to be in poor condition. Revenue collections continue to be disappointing and projections for fiscal 1993 have been revised downward by 6 percent to a level just sufficient to meet expenditures, causing a carryover of the $2.2 billion deficit. The governor's budget for 1993-94 assumes a drop of about 3 percent in revenues and recommends a 9 percent expenditure decrease to balance the budget and eliminate the deficit. The Commission on State Finances has indicated that about $725 million in revenues may be vulnerable as well as $301 million in expenditures, which would lead to a deficit of $1 billion at June 30, 1994. The budget estimate assumes that certain actions are taken by March 1, although no action has occurred to date. The projected deficit increases as these measures are delayed. In addition, California continues to have a large cash deficit in the general fund and will require additional short term borrowing this spring.
 -0- 03/19/93
 /CONTACT: Amy S. Doppelt, 212-908-0514, or Claire G. Cohen, 212-908-0552/


CO: State Public Works Board of the State of California ST: California IN: SU: RTG

AH -- NY068 -- 8056 03/19/93 17:09 EST
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Publication:PR Newswire
Date:Mar 19, 1993
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