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Fitch Rates Florida $16.7MM Education Capital Outlay GOs 'AA+'.

NEW YORK -- Fitch Ratings assigns an 'AA+' rating to $16.7 million State of Florida full faith and credit state board of education capital outlay bonds, 2006 series A, for bid on 18 hours notice as early as May 30. The 'AA+' rating on $806.7 million outstanding Florida capital outlay bonds is affirmed. The Rating Outlook is Stable.

Florida's full faith and credit bonds are secured by specific revenues. The capital outlay bonds are secured by a lien on first revenues of motor vehicle license taxes distributed to school and community college districts. The license taxes are distributed by formula to districts for capital outlay, including debt service, with excesses dedicated to state transportation-related uses. For participating districts, the number of enrollment-based instruction units is established to generate revenue, via formula, of at least 1.12 times (x) attributed debt service. This coverage level also is reflected in the additional bonds test. Fiscal 2005 license taxes given in aggregate to districts covered maximum annual debt service (MADS) following this issuance by 1.18x. Total license taxes grew from $563 million in fiscal 2004 to $600 million, or 6.14x MADS, in fiscal 2005.

The state's 'AA+' debt rating and Stable Rating Outlook is based on the overarching credit characteristics of the state, including a moderate debt burden, sound financial management practices, large reserves, fully funded pension systems, and a robust, broad service-based economy with a long track record of growth. The state faces large growth-related capital demands, especially for schools and class size reduction connected to a constitutional amendment, and rapid growth in Medicaid spending; also, its revenue sources are vulnerable to declines in the rates of population growth, consumption, and housing market activity.

Debt represents a moderate burden on Florida's resources, as the state targets debt service levels equal to 6% of revenues. Net tax-supported debt of approximately $18.5 billion, following this issuance, equates to a moderate 3.1% of 2005 personal income and is almost two-thirds full faith and credit general obligations.

Florida has accumulated large reserves, using parts of them for needs such as hurricane relief but prudently limiting their use for operating expenditures. Tax receipts surged in fiscal years 2004 and 2005, and combined general and stabilization fund balances grew to $4.6 billion, or 18.3% of revenues at the close of fiscal 2005. State revenues continue to climb and outperform estimates; general revenue forecasts for fiscal 2006, which were raised in April 2006, are anticipated to be $26.8 billion, or 7.5%, higher than fiscal 2005. Awaiting the governor's signature, with provisions subject to veto, the fiscal 2007 general fund budget is 5.2% higher than fiscal 2006, with education receiving over 50% of outlays, and includes a $153.7 million deposit to the budget stabilization fund, increasing its balance to nearly $1.25 billion, or approximately 4.5% of estimated fiscal 2007 revenues.

The fourth most populous state and the third fastest growing this decade, Florida boasts a broad service-based economy, which has shielded it from the manufacturing losses that have hurt other parts of the U.S. and reflects a growth state that draws in large numbers of new residents and visitors. Service industries, trade, and construction have an above average presence in the economy. Personal income per capita for 2005 was 96% of the U.S. and ranked 23rd among the states. April 2006 total non-farm employment was up 3.3% over a year ago, with construction jobs up 8.6% over the same period.

The bonds will be due Jan. 1, 2007-2026, with bidder's option to designate term bonds subject to mandatory redemption for bonds maturing in or after 2017. The bonds are callable beginning on Jan. 1, 2016 at 101%.

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.
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Publication:Business Wire
Date:May 25, 2006
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