The bonds are expected to sell via negotiated sale the week of
The Rating Outlook is Stable.
The bonds will be insured by the State of
KEY RATING DRIVERS
STATE ENHANCEMENT LINKED TO GO RATING: The rating is based on the support provided by the
IMPROVED FISCAL MANAGEMENT: Institutionalized changes to
WEALTHY, DIVERSE ECONOMY: The economy is wealthy and unmatched among U.S. states in its size and diversity. After severe, widespread recessionary conditions, growth has resumed, including in
MODERATE DEBT BURDEN: Tax-supported debt is moderate, although it has grown in the last decade for infrastructure needs and budgetary borrowing. Pension funded ratios have declined and contributions to the teacher system remain inadequate, but the state has instituted some benefit reforms.
CYCLICAL REVENUES AND CASH FLOWS: State finances are subject to periodic, severe budget and cash flow stress due to economic cyclicality, revenue volatility tied to personal income taxes, carried-over structural imbalances, a lack of reserves, and institutional inflexibility. The state expanded its ability to manage cash flow weakness during the last downturn, and other progress made to date can be expected to make the effects of future downturns more manageable.
TANGIBLE STRUCTURAL PROGRESS: Deep recurring spending cuts in recent adopted budgets and a restrained approach to restoring past cuts have significantly lowered the state's structural imbalance. Nevertheless, the state carries a heavy burden of budgetary borrowing from the last two fiscal crises and its historical difficulty achieving and sustaining budgetary solutions poses an ongoing risk.
INITIATIVES LIMIT FLEXIBILITY: Voter initiatives have reduced the state's discretion to effectively manage budgetary challenges over time. However, more recent initiatives authorizing a simple legislative majority to approve spending and temporarily raising tax revenues have been instrumental to current fiscal progress.
PROGRAM CHANGES OR SHIFTS IN STATE CREDIT QUALITY: The rating is sensitive to changes to existing Cal-Mortgage program parameters, or to changes in the state's GO bond rating, to which this rating is linked.
Cal-Mortgage is a division of the State of California OSHPD. Cal-Mortgage's mission is to improve access to capital for qualifying health care facilities without cost to taxpayers. The agency primarily guarantees debt issued on behalf of nonrated and below-investment-grade health care institutions that demonstrate community need.
Bond proceeds will be used by
The Cal-Mortgage program was originally authorized by voters in 1968. As of
In the event of a default by an insured borrower, debt service reserves and the HFCLIF balance are available to bondholders. If defaults on insured loans ever caused the HFCLIF and debt service reserves to be depleted, statutes and transaction documents require the state treasurer to issue debentures on parity with the state's GO bonds in the amount of principal and interest due but not paid, at a payment schedule and coupon rate identical to those of the bonds associated with the defaulted loan. These provisions support a rating on Cal-Mortgage equal to that of the state's GO bonds, currently rated 'A', with a Stable Outlook by Fitch.
For further information on the
Additional information is available at 'www.fitchratings.com'.
'Tax-Supported Rating Criteria', dated
'U.S. State Government Tax-Supported Rating Criteria', dated
'State Credit Enhancement Program Criteria', dated
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Rating Guidelines for State Credit Enhancement Programs
Source: Fitch Ratings
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