Fitch Rates Georgia's $578.8MM General Obligations 'AAA'.

NEW YORK -- Fitch Ratings assigns an 'AAA' rating to the State of Georgia's $578.8 million general obligation (GO) bonds (2006 series F and 2006 series G), for competitive bid on Sept. 19, and affirms the 'AAA' rating on $6.9 billion in outstanding GO bonds. The Rating

Georgia's superior 'AAA' credit standing is the result of its longstanding conservative debt management, consistent maintenance of sound finances, and a diversified and growing economy. Most of Georgia's tax-supported debt is in the form of GO or guaranteed revenue bonds. Ratios are growing but remain moderate, equal to $948 per capita and 3.1% of personal income, including this issue.

Amortization is rapid, with 71% due in 10 years. Georgia issued its first grant anticipation revenue vehicle (GARVEE) bonds in July 2006. The state has instituted a long-range debt planning process which foresees steady growth in debt over six years, largely GOs along with additional GARVEE bonds. Future debt burden is expected to remain below policy maximums, including debt per capita of $1,300 and debt to personal income of 4%. The state's pension system is well funded.

Georgia's economy has returned to strength since the last recession, with employment growth of 2.6% in 2005, compared to 1.5% in the U.S. July 2006 employment grew 1.9% over the prior year, compared to 1.3% for the U.S., with notable expansion in professional and business services, up 3%, and education and health, up 3%. The state's population has grown 40% since 1990, with growth concentrated in the Atlanta area, where nearly 60% of jobs are located. The bankruptcy declaration by Delta Airlines, which employs over 20,000 Georgians, remains a concern. The state continues to lose manufacturing jobs, particularly in textile and automotive sectors. Ford's closure of a plant near Atlanta this year is resulting in 2,100 job cuts, to be followed by 3,000 job cuts at a GM facility in 2008. These losses will be offset in part by 2,800 new jobs anticipated at a Kia facility planned in West Point by 2009.

The state's finances have recovered from their sudden decline in the early part of the decade, when revenues shrank in both fiscal 2002 and 2003. Balance was maintained through expenditure cuts, unanticipated federal aid, and use of surplus and reserve funds. The revenue shortfall reserve dropped from $700 million at June 30, 2002 to $52 million at the close of fiscal 2004. General fund tax collections grew 6% in fiscal 2004 and 8% in fiscal 2005, enabling the state to rebuild the revenue shortfall reserve balance to $251 million by fiscal year-end 2005. Fiscal 2006 saw continued strength, with revenues growing 9.6%; the state estimates a revenue shortfall reserve balance of $731 million for fiscal 2006, the highest level since fiscal 2001. The fiscal 2007 budget conservatively anticipates revenue growth of 1.6%, or $279 million, over fiscal 2006 estimates. Fiscal 2007 revenues through August are $156 million over the prior year, led by individual income tax receipts. Appropriations growth, which had been restrained prior to 2005, rose 7.5% in fiscal 2006. Appropriations are budgeted to rise an additional 4.5% in fiscal 2007, led by spending on education.

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