The Rating Outlook is Stable.
Unemployment compensation fund (UCF) special revenue bonds are special, limited obligations of the authority secured by a first lien on the trust estate, primarily revenue from certain special assessments levied by the
KEY RATING DRIVERS
AMPLE CASH AVAILABLE FOR PRINCIPAL PAYMENTS: The rating is based on the ample sources of cash available for principal repayment including collections of the state's regular state unemployment tax (SUTA) assessment and a special principal assessment (both of which are available for principal repayment). Funds from the regular SUTA assessment and principal assessment are pledged to bondholders once transferred to the trust estate.
INTEREST REQUIREMENTS FULLY FUNDED: Interest requirements for the bonds that were to be paid by a special interest assessment on employers have been fully funded by the state from available funds with all moneys deposited with the trustee for the benefit of bondholders.
COVERAGE OF PRINCIPAL BY BROAD UNEMPLOYMENT LEVY: The rate for the special principal assessment is set annually at a level to achieve 1x coverage of bond principal, while regular SUTA assessments intended to fund benefits are also available to bondholders as needed. Both assessments are levied on
PRINCIPAL PAYMENT TIMED AT HIGHEST COLLECTIONS: Principal payments are scheduled on
RAPID REPAYMENT OF BONDS: Bonds have a short maturity; final principal payment is on
STRONG COLLECTIONS AND ENFORCEMENT: The state's unemployment tax collection mechanisms are strong and well-established, with an historical collection rate of over 99%. All assessments are subject to the same penalties as other unemployment taxes.
STRONG STATE ECONOMY: The state has evidenced notable growth from the recession, and unemployment rates remain below national averages. Employment and income growth has surpassed that of national and regional averages.
The rating is sensitive to the performance of the state's economy, debt service coverage on the bonds, and the legal provisions supporting repayment of the bonds.
The 'AA' rating and Stable Outlook reflect the bondholder protection provided by the availability of regular SUTA assessment revenues for payment of principal, the legislatively authorized bond-specific special assessments on contributing
Proceeds of the 2012 bond issue repaid a
There are three components of authorized special assessments related to bond repayment: an assessment restricted to principal repayment, an assessment restricted to payment of interest on the bonds, and an assessment related to principal on any bonds issued to pay interest on the state's outstanding federal unemployment account loan. The assessment related to the payment of interest is no longer required as funds have been deposited with the trustee for this payment obligation through bond maturity in 2017. The third assessment was not used as the state applied premium received with the sale of the bond issues to repay the interest owed to the federal government.
Special principal assessments are collected from all contributing employers in the state and the division has covenanted to levy the special principal assessment at a rate sufficient to provide 1x coverage of required principal payments. Assessments for principal payments are levied with regular SUTA assessments and collected in quarterly installments and the annual collection rate has approximated 99%.
The principal assessment rate is determined on
DEBT SERVICE FUNDING
Special principal assessment revenue is collected in the UCF prior to transfer to the trustee. Available revenue in the UCF for principal payments (which consist of the special principal assessments, revenue from regular SUTA assessments, and UCF fund balances) are transferred five business days prior to the principal payment date. At point of transfer, these revenues become part of the trust estate and are pledged to bondholders.
Collections from the special principal assessment approximate 56% of total principal by
Cash flows from available revenues and fund balances provided strong coverage of principal requirements on each
STATE UNEMPLOYMENT ASSESSMENT SYSTEM
The bonds benefit from the well-established nature of the state's unemployment assessment system. Contributing
Currently, base SUTA assessment rates range from 0.81% to 10.87% reflecting each employer's experience on the first
Additional information is available at 'www.fitchratings.com'.
--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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