Fitch Ratings assigns 'AA+' ratings to the following State of
Mississippi general obligation (GO) bonds:
--$57.1 million Taxable GO Refunding Bonds (Nissan North America, Inc.
Proj), series 2012A;
--$43.715 million GO Refunding Bonds (Nissan North America, Inc. Proj),
--$100.585 million Taxable GO Refunding Bonds (Nissan North America,
Inc. Proj), series 2012C (LIBOR Index);
--$78.72 million GO Refunding Bonds (Capital Improvements Proj), series
2012D (SIFMA Index);
--$71.98 million Taxable GO Refunding Bonds, series 2012E;
--$137.965 million GO Refunding Bonds, series 2012F.
The series A through D bonds are expected to sell via negotiation the
week of July 23, 2012. The series E and F bonds are expected to sell via
negotiation the week of Aug. 6, 2012.
In addition, Fitch affirms the 'AA+' rating on the state's $4.2 billion
in outstanding GO bonds and the 'AA' rating on $201 million of
appropriation backed bonds issued by the Mississippi Development Bank
(Dept. of Corrections).
The Rating Outlook is Stable.
The bonds are general obligations of the state, with its full faith and
KEY RATING DRIVERS
STRONG FINANCIAL MANAGEMENT: Mississippi's financial management is
conservative and action to maintain balance amid revenue weakness has
been prompt. Stringent budget control mechanisms exist and reserve
levels remain sound. The 98% budgeting policy, which was suspended
through the recession, has been reinstated for fiscal 2013.
MANUFACTURING BASED ECONOMY: The state's socio-economic profile is
relatively weak with wealth and educational attainment indicators that
lag national levels. The economy continues to diversify and some
successful economic development initiatives should bolster employment in
the coming years; however, the manufacturing concentration well exceeds
HIGH LIABILITIES DUE TO PENSIONS: Mississippi's debt burden is moderate,
but above average, and is largely in the form of GO debt. Unfunded
pension liabilities, measured as a percent of personal income, are among
the highest of the states despite a record of funding required annual
Mississippi's long-term GO rating of 'AA+' and Stable Outlook reflect
the state's consistently conservative financial practices and
established reserves. The gradual draw-down of the Working Cash
Stabilization Fund, which had reached a peak funding level of $362
million in fiscal 2008, has allowed the state to manage reductions in
tax revenue associated with the recession. The fund is estimated to hold
$115.6 million as of the end of fiscal 2012, down from $191 million at
the end of fiscal 2011, a sign of the slow rebound in revenue being
experienced by the state. Revenue estimating continues to be
conservative, with the forecast for the current fiscal year requiring no
growth over final estimated prior-year results.
Economic weakness related to the recession resulted in revenue declines
of 4.3% and 4.9% in fiscal years 2009 and 2010, respectively. Revenues
began to rebound in fiscal 2011 with 2.4% growth and fiscal 2012
unaudited revenues are reported to have exceeded forecast, growing an
estimated 5.9% year-over-year.
Balance was maintained through budget restraint, often with mid-fiscal
year adjustments, the application of federal stimulus monies and through
the gradual drawdown of reserves accumulated prior to the recession. The
state did suspend its 98% budgeting policy for fiscal years 2008 through
2012, but has returned to this historical practice in the fiscal 2013
budget as the economy and associated revenues improve.
Budgeted spending in fiscal 2013 reflects growth of 4.3% over estimated
fiscal 2012 spending, while revenues are assumed to be flat. To achieve
balance, the budget includes 5.5% cuts to many agencies and uses cash
balances in several funds, some of which are expected to be replenished
by surpluses generated by the return to the policy of appropriating only
98% of expected revenues.
Mississippi employment when compared nationally is overweight in the
volatile manufacturing sector. The state lost jobs in the recession
generally in line with the U.S. experience, with employment down 5.5%
between 2007 and 2010 compared to a 5.7% loss for the nation. However,
the state has been lagging the U.S. in the recovery. Employment growth,
which resumed at a slow pace in mid-2010, has reversed over the past
year, with year-over-year job losses of 0.1% in 2011 and 0.4% in May
2012. U.S. employment has continued to grow at 1.4% in May. The
unemployment rate has fallen from its peak of 11% in February 2010, but
remains above the U.S. rate at 8.7% in May 2012. With the state's
investment in economic development projects designed to diversify and
growth the economy, a return to slow growth is expected.
Income performance in Mississippi had been exceeding that of the U.S. in
recent years; however, the weak job performance is reflected in personal
income growth in 2011 that was just 76% of the national rate. Per capita
personal income in 2011 of $32,176 is just 77% of the U.S. level,
ranking Mississippi 50th among the states.
The state's net tax supported debt burden of approximately $5.2 billion
represents a moderate but above average burden on resources at 5.6% of
2011 personal income. Debt is largely GO and amortization is average,
with 55% of outstanding GO debt to be retired in 10 years.
Pension funding continues to decline, although the state has
consistently funded its required annual contributions and passed pension
legislation in 2010 that increased employee contributions to the system
to 9% from 7.25% to offset increased annual funding demands. The funding
of the state's Public Employees' Retirement System was 62.2% as of June
30, 2011. On a combined basis, the burden of net tax-supported debt and
adjusted unfunded pension obligations that are attributable to the state
equals 18.6% of 2010 personal income, well above the 6.6% median for
U.S. states rated by Fitch, and amongst the weakest of the states.
Nevertheless, Fitch notes that the demands of debt and pensions on the
state's operating budget continue to be manageable.
The current offerings refund outstanding debt for debt service savings
and refinance variable rate debt with both fixed rate bonds and floating
rate notes. By refunding the outstanding variable rate debt, the state
is reducing its variable rate exposure and eliminating the need to
maintain liquidity facilities on such bonds. Interest rate swap
agreements that were entered into to hedge this exposure remain
outstanding and currently have negative mark-to-market valuations.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in the
Tax-Supported Rating Criteria, this action was additionally informed by
information from IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'Enhancing the Analysis of U.S. State and Local Government Pension
Obligations' (Feb. 17, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Enhancing the Analysis of U.S. State and Local Government Pension
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