NEW YORK–(BUSINESS WIRE)–Fitch Ratings has assigned an ‘AAA’ appraisement to the afterward accompaniment of Georgia bonds:
–$376,815,000 accepted obligation (GO) refunding bonds 2016E;
–$504,210,000 GO refunding bonds 2016F.
The bonds will advertise via aggressive bid, on or about Oct. 19, 2016.
The Appraisement Outlook is Stable.
The GO bonds are accepted obligations of the accompaniment of Georgia, anchored by a agreement of the state’s abounding acceptance and credit.
KEY RATING DRIVERS
Georgia’s ‘AAA’ Issuer Default Appraisement (IDR) and GO appraisement reflect the state’s bourgeois debt management, authentic alertness and adeptness to abutment bread-and-er antithesis and a broad-based and growing economy. The accompaniment took again activity during the recession to advance bread-and-er antithesis through abrupt spending cuts and draws from its rainy-day armamentarium (the acquirement arrears assets [RSR]). Aback then, Georgia has maintained a bourgeois admission to bread-and-er management, attached spending advance and authoritative advance in rebuilding the RSR balance. The state’s abiding accountability accountability is low.
Bread-and-er Resource Abject
The state’s bread-and-er contour is agnate to that of the nation with trade, busline and utilities and assorted anniversary sectors, including professional, business, apprenticeship and health, authoritative up the better above shares. Job losses during the Great Recession were decidedly steep, but the state’s accretion has outpaced the nation’s. Georgia’s demographic contour is somewhat alloyed with above-average citizenry advance and a boilerplate age beneath the nation’s, but the accompaniment has weaker abundance indicators. Overall, these factors should abutment added solid bread-and-er growth. Atlanta serves as a civic accumulated and busline hub, historically anchoring the state’s economy. Amplification in the advanced challenged accomplishment industry is amid the key drivers of advance alfresco the Atlanta busline area.
Acquirement Framework: ‘aaa’ agency appraisal
Georgia’s revenues, primarily assets and sales taxes, will abide to reflect the abyss and above of the economy, and its solid advance potential. The accompaniment has complete ascendancy over its revenues, with an about absolute acknowledged adeptness to accession operating revenues as needed. A contempo built-in alteration attached the claimed assets tax bulk does not absolute Fitch’s appraisal aback abounding adaptability charcoal for added acquirement sources.
Bulk Framework: ‘aaa’ agency appraisal
The accompaniment maintains abounding bulk adaptability with a low accountability of accustomed costs and the abounding expense-cutting adeptness accepted to best U.S. states. Additionally as with best states, Medicaid charcoal a key bulk driver, but one that Fitch expects to abide manageable.
Long-Term Accountability Burden: ‘aaa’ agency appraisal
Georgia’s abiding accountability accountability is low, and all-embracing debt administration is conservative. While the accompaniment issues bonds consistently for basal needs, acquittal of arch is rapid. Additionally, Georgia absolutely funds its actuarially bent employer contributions (ADECs, aforetime ARC) for pensions, befitting the unfunded accountability actual low.
Operating Performance: ‘aaa’ agency appraisal
The accompaniment is well-positioned to accord with bread-and-er downturns, with awfully able gap-closing accommodation due to its abounding ascendancy over revenues and spending and rebuilt RSR. Georgia has a clue almanac of abating banking adaptability during bread-and-er expansions, which is important accustomed the state’s aloft boilerplate acquirement volatility.
SOLID FINANCIAL MANAGEMENT: The appraisement is acute to accouterment in Georgia’s axiological acclaim characteristics including its history of appropriate activity to abode bread-and-er challenges and proactive measures to ensure bread-and-er flexibility.
Afterwards a aciculate recessionary downturn, the state’s assorted abridgement has accelerated with application advance outpacing civic trends. Accretion in the accomplishment above has been decidedly important. In the past, low value-added accomplishment had been a primary bread-and-er disciplinarian in the areas alfresco Atlanta. Those industries beneath in the years arch up to the recession, which affronted the bread-and-er losses. However, aback 2011, the above has been growing with key assets advancing in the automotive industry.
The apartment bazaar abatement hit Georgia decidedly hard; however, accretion has been strong, with absolute implications for bread-and-er and acquirement growth. Apartment prices beneath precipitously above the state, decidedly in the Atlanta city above in 2008 and 2009. Prices rebounded with advance in the Atlanta above far outpacing best added aloft city areas by backward 2012. By mid-2014, Atlanta’s advance slowed and has confused in bike with civic trends aback then.
Georgia’s claimed assets tax (PIT) and sales and use tax calm anniversary for about three-fourths of the state’s accepted armamentarium receipts. The PIT abandoned makes up about bisected of absolute receipts. Both acquirement sources are adequately economically acute and acknowledge bound to accouterment in the state’s bread-and-er trajectory.
Fitch anticipates acquirement advance will abide hardly absolute on a absolute basis, in band with the actual trend, accustomed the state’s solid bread-and-er advance prospects. Able-bodied acquirement advance in years of bread-and-er assets is account by aciculate declines aback Georgia’s abridgement contracts.
Georgia afresh allowable a built-in cap on its assets tax bulk at the accepted level, but no such absolute exists for the sales tax or added accompaniment acquirement sources. While the PIT is the state’s best cogent acquirement stream, Fitch does not appearance the built-in cap as a attached agency in the acquirement framework assessment. For all added taxes and fees Georgia has no acknowledged limitations on its absolute adeptness to accession revenues through abject broadenings, bulk increases, or the appraisal of new taxes or fees.
As in best states, apprenticeship and bloom and animal casework spending are Georgia’s better operating expenses. Apprenticeship is the above band item, as the accompaniment provides cogent allotment for bounded academy districts and the accessible university and academy system. Bloom and animal casework spending is the added better above of spending, with Medicaid actuality the primary driver.
Spending growth, absent activity actions, will acceptable be in band with, to hardly above, acquirement advance apprenticed primarily by Medicaid, acute approved account administration to ensure advancing balance. The bread-and-er claiming of Medicaid is accepted to all U.S. states and the attributes of the affairs as able-bodied as federal government rules absolute the states’ options in managing the clip of spending growth.
In added aloft areas of spending such as education, Georgia is able to added calmly acclimatize the aisle of advance and did so during and afterwards the recession. Next year, the accompaniment assembly will accede recommendations from a gubernatorial apprenticeship ameliorate agency that accommodate added accompaniment spending for K-12 apprenticeship and an check of the blueprint acclimated to admeasure accompaniment and bounded allotment responsibilities. Fitch anticipates the accompaniment will achieve changes constant with its about bourgeois bulk administration that will not materially adapt the appraisal of Georgia’s accustomed clip of spending growth.
Georgia retains abounding bulk flexibility. While Medicaid costs are somewhat above the state’s adeptness to materially change accustomed federal requirements for the program, the state’s accustomed costs are low and absurd to amplify decidedly accustomed anxiously managed debt arising and abounding actuarial alimony contributions. Like best states, Georgia’s operating account goes abundantly appear allotment of casework rather than absolute anniversary commitment acceptance the accompaniment to about-face costs to lower levels of government in times of bread-and-er stress.
Long-Term Accountability Accountability
Best of the state’s bashful tax-supported debt accountability is in the anatomy of GO or affirmed acquirement bonds and acquittal of arch is rapid, with about 70% crumbling aural 10 years. Added outstanding obligations accommodate federal admission apprehension acquirement (GARVEE) bonds, basal leases, multi-year leases entered into by the Accompaniment Properties Commission, and a baby bulk of addendum and loans. Including the accepted sale, net tax-supported debt charcoal low at 2.6% of 2015 accompaniment claimed income.
Georgia’s aloft alimony systems accoutrement both accompaniment admiral and agents accept benefitted from constant abounding allotment of the ARC/ADEC. As of the June 30, 2015, appraisal and beneath the new GASB 67 advertisement standard, system-wide ratios of assets to liabilities for the accompaniment admiral and teachers’ affairs were appear at 76.2% and 81.4%, respectively. Both ratios were constant with above-mentioned year after-effects beneath the above-mentioned GASB advertisement standard. Application Fitch’s added bourgeois 7% abatement bulk assumption, the accompaniment admiral and teachers’ affairs are adjourned at 69% and 77.6%, respectively, as of June 30, 2015.
As appear in Fitch’s October 2015 accompaniment pensions update, Georgia’s net tax-supported debt and Fitch-adjusted unfunded alimony accountability attributable to the accompaniment totaled a low 4.9% of 2014 claimed income. This is beneath the boilerplate of 5.8% for U.S. states
Georgia’s awfully able gap-closing adeptness during alternate downturns derives primarily from its above account flexibility. Bourgeois bread-and-er practices and a somewhat volatile, but still assorted and expanding, abridgement activity a able belvedere for the accompaniment to gradually restore bread-and-er adaptability already utilized. Georgia about responds to bread-and-er accent with spending abstemiousness and use of bread-and-er reserves. During the Great Recession, the state’s primary assets armamentarium (the RSR) went from a aiguille of $1.5 billion in bread-and-er 2007 to $104 actor in 2009.
Afterwards a account is enacted, the governor has cogent approved ascendancy to administrate the account and calibration aback spending as needed, acceptance the accompaniment to be acknowledging to alteration conditions. The accompaniment fabricated approved use of this apparatus during the aftermost recession. Alike several years into the recovery, the governor consistently ordered best agencies to abate spending beneath allowable account levels anon afterwards the alpha of bread-and-er years as a basal measure. The tactic contributed to approved operating surpluses and rebuilding of reserves.
As revenues antithesis in bread-and-er expansions, Georgia works against re-establishing reserves, primarily in its RSR, and gradually abating prior-year cuts. Approved requirements to alteration all end of year surpluses to the RSR (until its approved cap, currently 15%) led the accompaniment to body a ample antithesis arch into the aftermost recession of aloof added than 8% of net revenues. And afterwards cartoon bottomward the RSR decidedly during the Great Recession, the accompaniment steadily contributed to it during the expansion. At the end of bread-and-er 2015, the antithesis of $1.4 billion (net of an anniversary mid-year allotment for K-12 education) was 7% of net revenues.
Georgia has been slower to restore spending cuts, which were best acutely fabricated in apprenticeship spending. It took until bread-and-er 2015 for anniversary accompaniment appropriations for apprenticeship to ability the pre-recession peak, and alike again acceptance advance aback the recession adumbrated connected spending pressure. Added abundant increases in bread-and-er 2016 and in the allowable account for bread-and-er 2017 accomplish added advance appear absolutely abating above-mentioned cuts. The apathetic apology reflects Georgia’s historically bourgeois bread-and-er practices. Fitch addendum the accompaniment has consistently met its actuarial alimony allotment commitments and about abhorred non-recurring account acclimation measures aback affairs out of the recession.
Georgia’s acquirement achievement in bread-and-er year 2016 was able and advanced of the allowable account anticipation absorption both all-embracing bread-and-er advance as able-bodied as structural and procedural changes. PIT revenues were up a able-bodied 7.9% for the year with assets in both denial (6.4%) and non-withholding (7%). Sales and use tax revenues to the accepted armamentarium were up a bashful 1.7% for the year, which partially reflects cogent busline allotment changes that resulted in a allocation of sales tax revenues alive abroad from the accepted fund. Absolute accompaniment accepted armamentarium receipts were up 8.8%. The adapted bread-and-er year 2016 (AFY) account relied on 6.2% advance in revenues which enabled the accompaniment to add $394 actor to the RSR.
For bread-and-er 2017, the allowable account continues the trend of application acquirement advance to abutment affairs amplification and apology of above-mentioned year cuts. The account forecasts accepted armamentarium acquirement advance of 1.3% from bread-and-er 2016. Apprenticeship allotment is up conspicuously with $432.5 actor (4.6% from the allowable FY 2016 budget) in added Quality Basal Apprenticeship Affairs allotment (basic aid) for K-12. Healthcare costs, including for Medicaid, additionally accustomed added allotment in both the AFY 2016 and allowable bread-and-er 2017 budgets. Through the aboriginal quarter, accompaniment accepted armamentarium receipts were up 3.6%.
Busline allotment added essentially with acceptance of House Bill 170 (HB 170) aftermost year, which helps abode the growing state’s basement demands. The bill adapted the state’s tax anatomy for busline able July 1, 2015. The state’s administration of acquirement estimates the changes added revenues $794 actor in bread-and-er 2016.
Date of Accordant Appraisement Committee: June 2, 2016
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U.S. Tax-Supported Appraisement Belief (pub. 18 Apr 2016)https://www.fitchratings.com/site/re/879478
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