Fitch Rates Mississippi's $62MM GO Notes 'F1+'

The 'F1+' rating reflects Mississippi's general credit characteristics. The state expects to issue long-term GO bonds or renewal notes to pay the notes when due.

Mississippi's long-term GO rating of 'AA' and Stable Rating Outlook are based on the state's solid reserve levels, diversifying economy, and historically conservative borrowing and financial practices tempered by low wealth and education levels. The state's Working Cash-Stabilization Fund, which in recent years had approached goal levels, despite withdrawals is expected to hold $245 million at the close of fiscal 2010, representing 5% of fiscal 2010 general fund expenditures. Fitch notes that the state has suspended its 98% budgeting policy in fiscal years 2008, 2009 and 2010.

Mississippi experienced employment growth in the first half of 2008, though a reversal mid-year led to an annual decline of 0.5%, slightly worse than the national decline of 0.4%. September 2009 employment was down 3.5% statewide from the prior year, with the losses led by the dominant manufacturing sector. The important casino industry is also experiencing employment contraction. State unemployment in September 2009 was 9.2%, up significantly from 7.4% one year prior. Income growth has exceeded national growth levels in 2007 and 2008; however, per capita personal income in 2008 of $30,399 is just 76% of the U.S. level, ranking Mississippi 50th among the states.

Fiscal 2009 revenues were $384 million below initial expectations and $208 million, or 4.2% below those of fiscal 2008. Balance was maintained through approximately $200 million in spending reductions, balance draws, including $49 million from the Working Cash-Stabilization Fund, and the application of federal stimulus monies. The Working Cash-Stabilization fund balance at the close of fiscal 2009 was $315 million, representing 6.7% of fiscal 2009 spending. The adopted fiscal 2010 budget, exclusive of federal stimulus monies, is 5.3% below fiscal 2009 appropriations and a $65 million Working Cash-Stabilization Fund withdrawal is planned. Fiscal 2010 revenues, last estimated in March, projected relatively flat performance to fiscal 2009, though performance through Oct. 31, 2009 was $112 million, or nearly 8%, below expectations. The state's next forecast will be available later this month. To date, the governor has proactively implemented $172 million in spending cuts since the start of the fiscal year to maintain fiscal balance. After the planned fiscal 2010 withdrawal, the Working Cash-Stabilization Fund is projected to hold $245 million at the close of the fiscal year, representing 5% of fiscal 2010 budgeted general fund expenditures.

The state's net tax supported debt of approximately $4.6 billion, represents a moderate but above average burden on resources at 5.2% of 2008 personal income and $1,572 per capita. Debt is largely GO and amortization is above average, with 74% of GO debt to be retired in 10 years.

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