Fitch takes rating actions on Texas Public Finance Notes
Global rating agency Fitch will take various rating actions on the short-term ratings of the following commercial paper (CP) notes of the State of Texas Public Finance Authority (TPFA):
$8.25 million general obligation CP notes, series 2002A (tax-exempt), confirmed at 'F1+', effective Nov. 16, 2012; $24 million general obligation CP notes, series 2002B (taxexempt), confirmed at 'F1+', effective Nov. 16, 2012; $150 million tax-exempt CP revenue notes, series 2003, upgraded to 'F1+', from 'F1', effective Dec. 4, 2012;
$300 million general obligation CP notes, series 2008 (tax-exempt), upgraded to 'F1+' from 'F1', effective Nov. 26, 2012. The affirmation of series 2002A and series 2002B and the upgrade of series 2003 and series 2008 are based on the expected substitution of each series' existing external liquidity provider by liquidity provided by the State of Texas under separate series liquidity agreements entered into between TPFA and the Texas Comptroller of Public Accounts. In addition, Fitch affirms the 'F1+' short-term rating on other outstanding TPFA CP based on liquidity furnished by the state, as follows: $171.8 million GO CP notes (Cancer Prevention and Research Institution of Texas Project), series A (taxable) and series B (tax-exempt).
The GO CP notes are general obligations to which the state pledges its full faith and credit. The CP revenues notes are special obligations of TPFA payable from lease payments of the state, subject to biennial appropriation.
'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that continues to outpace national averages. Financial pressures arise from the demand that rapid growth places on the state's consumption-based tax system, including longer-term transportation needs and the state's commitment to education. The budget for the fiscal 2012-2013 biennium relied on significant cuts to baseline projected spending to maintain balance, while leaving the balance of the economic stabilization fund (ESF) untouched. Actual revenue collections have consistently over-performed previous assumptions since budget adoption, and the ESF balance has grown to $6.1 billion; the comptroller forecasts that the balance will rise to $8.1 billion by the end of the fiscal 20122013 biennium.