Fitch Ratings affirms the 'AA+' rating for the State of Georgia School
Credit Enhancement Program.
The Rating Outlook is Stable.
KEY RATING DRIVERS
STATE INTERCEPT OBLIGATION: The rating is based on the state's
obligation to intercept school district aid in a timely manner as needed
to pay debt service. Administrative, structural and legal protections
provide credit enhancement for qualifying school district debt at a
level one notch below the state's own 'AAA' general obligation (GO) bond
TIMELY PAYMENT OF DEBT SERVICE: Program mechanics allow sufficient time
for state funds to be made available to pay debt service by the debt
service payment date.
STRONG STATE OVERSIGHT: The state has a demonstrated commitment to
education funding, with state funds providing the bulk of overall school
funding; all state payments are subject to intercept. The state
exercises careful oversight of school finances and debt issuance.
STATE RATING: The rating on the credit enhancement program is directly
linked to the state's GO debt rating.
PROGRAM CHANGES: Change in the statutes, regulations, or administrative
procedures governing the credit enhancement program that alter the
current mechanisms to ensure timely payment of debt service could
trigger rating action.
If a participating school district or system fails to remit to its bond
paying agent the full amount of its debt service payment, the State
Board of Education (BOE) will intercept any state appropriation due to
the school district and from that amount transmit sufficient funds to
the paying agent so that the full debt service payment can be made.
The 'AA+' rating on the school credit enhancement program reflects the
state of Georgia's overall credit quality, as well as the breadth and
strength of the state's school aid intercept law and associated security
features. Sections 20-2-170 and 20-2-480 of the Official Code of Georgia
Annotated stipulate that any school district or system may, prior to the
issuance of any bond, authorize the State Board of Education to withhold
any state appropriation due to that issuer and apply as much of it as
necessary for the payment of any debt service then due. The intercept
has never been called on.
Georgia's financial support and oversight of its schools is strong. The
state provides the majority of K-12 public school funding, primarily
through its formula-based Quality Based Education (QBE) program. QBE is
the single largest component of the state's budget. State law and
regulations require Georgia's 180 school districts to submit their
annual balanced budgets and audits to the state for inspection, and
those in deficit situations receive heightened attention until their
deficiencies are corrected. Georgia's state constitution limits school
district GO debt to 10% of asessed value. Under a 1996 constitutional
amendment, many school districts in the state use their respective
counties' 1% special local option sales tax for capital projects and
related debt retirement with voter approval.
Upon request, Fitch will assign the program rating to the bonds of any
participating school district or system based on the following
conditions, which mirror the state's own requirements for participation
in the program:
--Moneys are due to the paying agent at least 15 days in advance of the
bond payment date to allow time for the state to exercise the intercept
mechanism, if necessary.
--The paying agent and the issuer are obligated to notify the BOE if the
payment has not been remitted on time.
--Debt payments should not be scheduled during June (when sufficient
remaining interceptable funds may not be available), July (in case state
budget approval is delayed), or the last two weeks in December (when
certain school and state officials may be unavailable). School aid is
paid at the end of each month in approximately equal installments and
school districts and systems generally have a June 30 fiscal year end.
--Per Fitch's criteria, there is at least 1.25x to 1.5x coverage of
historical annual school aid to pro forma maximum annual debt service
(1.5x minimum applies to districts with less established service areas
and/or more volatile expected enrollment trends), as well as sufficient
coverage from remaining annually appropriated interceptable funds of
debt service on each debt service payment date.
For more information on the State of Georgia's GO bond rating, please
see the Nov. 5, 2013 press release, 'Fitch Rates Georgia $173MM General
Obligations 'AAA'; Outlook Stable' available on Fitch's website at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Rating Guidelines for State Credit Enhancement Programs' (Apr. 18,
Tax-Supported Rating Criteria
Rating Guidelines for State Credit Enhancement Programs
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
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