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Fitch Rates Georgia's $104MM GO Bonds 'AAA'.

NEW YORK -- Fitch Ratings assigns an 'AAA' rating to the state of Georgia's $96.4 million series 2005 C and $7.6 million (taxable) series D general obligation (GO) bonds, for competitive bids Oct. 11, and affirms the 'AAA' rating on approximately $6.5 billion outstanding GOs. Series 2005 C is due Nov. 1, 2006-10 and series 2005 D is due Nov. 1, 2006-25.

Georgia's superior 'AAA' credit standing is the result of its excellent debt policies, fiscally conservative management, and diversified and growing economy.

Following nine consecutive years with more rapid job and income growth than that of the nation, Georgia's economy was hard-hit by the national recession, beginning in 2001, and recovery has been tepid. The halted growth eroded state's revenues, forcing expenditure reductions and the depletion of accumulated reserves. Tax revenue growth returned in fiscal 2004 and 2005, and while economic improvement is evident, revenue growth is not robust and financial pressure remains.

Georgia's economy largely mirrors the nation, and like the nation, manufacturing is around 11% of jobs. Population growth has been rapid, particularly in the Atlanta area, where nearly 60% of jobs are located. Georgia suffered three consecutive yearly employment declines from 2001-03, and job growth resumed at 1.2% in 2004. Through August, employment was up 0.8% over last year, less than half the national rate. Personal income growth outpaced the U.S. throughout the 1990s, and has roughly matched it during this decade. On a per capita basis, growth has lagged the U.S., dropping Georgia's rank among the states to 32nd. The recent bankruptcy declaration by Delta Airlines, which employs over 27,000 Georgians, is a concern.

The state's finances are now recovering from their sudden decline in the early part of the decade, when revenues shrunk in both fiscal 2002 and 2003. Balance was maintained through expenditure cuts, unanticipated federal aid, and use of surplus and reserves. Reserves, including both the shortfall and the midyear adjustment reserve, dropped from $881 million at June 30, 2002 to about $198 million at the close of fiscal 2004. The two reserves were combined during fiscal 2005, and the approximate balance at June 30 had recovered to $381 million. General fund tax collections grew 6.3% in fiscal 2004 and are estimated to have risen 9% in fiscal 2005. The budget for fiscal 2006 assumes revenues moderating somewhat. Appropriation growth has been restrained, particularly when nearly 8% population growth since 2000 is considered. Total allotments in fiscal 2005 were up less than 5% from 2001; the university system was cut nearly 9% over that period. Following delays in the publication of the 2003 Comprehensive Annual Financial Report (CAFR) due to a new accounting system, the 2003 and 2004 CAFRs were recently published.

Nearly all of Georgia's debt is in the form of GO or guaranteed revenue bonds. Ratios remain moderate, equal to $834 per capita and 2.9% of personal income after this issue. Amortization is rapid, with 71% due in 10 years. The state's pension systems are well funded.

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:Oct 7, 2005
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