Fitch Rates $68MM VA Pub School Authority Notes 'AA+'; Stable Outlook

NEW YORK--()--Fitch Ratings has assigned a 'AA+' rating to $67.51 million in Virginia Public School Authority (VPSA), School Technology and Security Notes, Series IV. The Rating Outlook is Stable.

The bonds are expected to price through competitive bid on May 3, 2016.

SECURITY

VPSA's school educational technology and security notes are payable from appropriations from the Commonwealth of Virginia's (IDR 'AAA') literary fund and, in the event of literary fund insufficiency, a 'sum sufficient' appropriation from the Commonwealth's general fund. This appropriation support provides the basis for the rating.

KEY RATING DRIVERS

Analytical Conclusion:

Virginia's 'AAA' IDR rating reflects its solid fiscal resources, conservative approach to financial operations, and exceptional financial flexibility. The state's strong fundamental economic profile provides a stable revenue base and indicates solid growth prospects. Low long-term liability levels indicate the Commonwealth retains ample capacity.

Economic Resource Base:

Virginia's economic profile remains strong with a diverse mix of industries and high wealth levels, and Fitch expects the Commonwealth to absorb the negative effects of federal contraction and maintain economic growth. Government and professional and business services are the leading sectors. Government employment has been flat to declining for the past several years, but professional and business services employment has grown rapidly since mid-2014 declines, driving overall gains in the Commonwealth's employment levels. Growth prospects are solid with above-average population growth and high education levels signaling a well-positioned workforce.

Revenue Framework: 'aa' factor assessment

Fitch expects that Virginia's revenues, primarily income and sales taxes, will continue to reflect the depth and breadth of the economy, but also its volatility. The Commonwealth has complete control over its revenues, with an unlimited legal ability to raise operating revenues as needed.

Expenditure Framework: 'aaa' factor assessment

The Commonwealth maintains ample expenditure flexibility with a low burden of carrying costs for liabilities and the broad expense-cutting ability common to most U.S. states. Also as with most states, Medicaid remains a key expense driver, but one that Fitch expects to remain manageable.

Long-Term Liability Burden: 'aaa' factor assessment

Virginia's long-term liability burden is low and well-managed. Debt issuance is carefully monitored through both constitutional limitations and more stringent policy and institutional practices. Despite a budget-driven deferral of pension contributions that weakened the funded position, the Commonwealth's unfunded obligations remain below those of most states.

Operating Performance: 'aaa' factor assessment

The Commonwealth remains extremely well-positioned to deal with economic downturns, with exceptionally strong gap-closing capacity in the form of its control over revenues and spending and a demonstrated willingness to restore financial flexibility at times of recovery.

RATING SENSITIVITIES

VPSA NOTES: The rating for the VPSA notes is sensitive to changes in the Commonwealth's 'AAA' IDR, to which it is linked.

CREDIT PROFILE

VPSA note proceeds from the current offering will be used to make grants primarily to school divisions of cities, towns, and counties of the Commonwealth for school technology and security projects. The series IV notes are being issued pursuant to two separate, but similar note resolutions, which both include appropriations from Virginia's literary fund and, if those are not adequate, a 'sum sufficient' appropriation from the Commonwealth's general fund. The appropriation, which the governor must request from the general assembly pursuant to statute, provides the primary source of security. Additional strength derives from Virginia's fundamental credit profile reflected in its 'AAA' IDR, and the state commitment to education.

For more information on the Commonwealth's IDR, please see the Fitch release titled 'Fitch Rates $300MM VA Commonwealth Transportation Board Revs 'AA+'; Affirms 'AAA' Commonwealth GOs', dated April 21, 2016 and available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in the applicable criteria specified below, this action was informed by information from CreditScope.

Applicable Criteria

U.S. Tax-Supported Rating Criteria (pub. 18 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879478

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003064

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Contacts

Fitch Ratings
Primary Analyst
Eric Kim
Director
+1-212-908-0241
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Laura Porter
Managing Director
+1-212-908-0575
or
Committee Chairperson
Douglas Offerman
Senior Director
+1-212-908-0889
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Eric Kim
Director
+1-212-908-0241
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Laura Porter
Managing Director
+1-212-908-0575
or
Committee Chairperson
Douglas Offerman
Senior Director
+1-212-908-0889
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com