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MOODY'S ASSESSES IMPACT OF STATE BUDGET PROBLEMS ON RATINGS FOR SCHOOL DISTRICT TAX ANTICIPATION NOTES IN CALIFORNIA

 MOODY'S ASSESSES IMPACT OF STATE BUDGET PROBLEMS ON RATINGS
 FOR SCHOOL DISTRICT TAX ANTICIPATION NOTES IN CALIFORNIA
 NEW YORK, June 4 /PRNewswire/ -- Moody's Investors Service -- The recent announcement that the State of California currently projects a $5.7 billion deficit at June 30, 1993 has raised a strong possibility that funding for school districts may be cut substantially from what had been proposed in the Governor's January budget. Some scenarios depict cuts in education as large as $2 billion, or 9.1 percent for 1992-93. Since final budget decisions are not expected until July, this raises questions about the many tax and revenue anticipation notes (TRANs) for school districts which Moody's is currently in the process of rating.
 Moody's is continuing to rate TRANs for school districts while the budget issues are being resolved; however, we are looking at each issue on an individual basis and will supplement our usual analysis with some additional lines of questioning. In general, we believe that TRANs issued in California offer some unique and inherent legal protections to noteholders, such as early segregation of funds for note repayment, with segregated funds held by the county. In addition, the strong oversight role of the Superintendent of Public Instruction, particularly with the power included in recently enacted legislation (AB 1200), adds further security.
 However, because of the uncertainty of the current state budget debate as well as the financial stress which many districts are beginning to experience, Moody's analysts are exploring what contingency plans districts are developing to address potential reductions in state aid.
 According to Dan Heimowitz, "Our analysts have had discussions with over 60 districts so far in the course of rating their TRANs. In general, we have found that officials have prepared realistic, although sometimes severe, contingency plans and are well aware of the uncertainties ahead. Because our discussions and analysis will assume a worst-case scenario, we do not anticipate the need to revise short-term ratings later in the year."
 -0- 6/4/92
 /CONTACT: Barbara Flickinger, 212-553-7736, or David Brodsly, 415-274-1739, both of Moody's/ CO: ST: California IN: SU: RTG


SH-OS -- NY067 -- 7142 06/04/92 15:15 EDT
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Date:Jun 4, 1992
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