Fitch Rates Wisconsin's $598MM Appropriation Bonds 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'AA-' rating to the following General Fund Annual Appropriation Bonds of the State of Wisconsin:

--$399.83 million refunding bonds of 2016, series A (taxable);

--$198.3 million refunding bonds of 2016, series B (taxable).

The bonds will be sold via negotiation on or about Aug. 1, 2016.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by annual legislative appropriations from the state's general fund.

KEY RATING DRIVERS

The rating on the bonds backed by Wisconsin's lease appropriation is one notch below the state's Issuer Default Rating (IDR), reflecting the slightly higher degree of optionality associated with payment of appropriation debt. Wisconsin's 'AA' IDR recognizes its considerable resources and power to control its budget, a broad and diverse economy , and the state's low liability burden, with above-average debt levels offset by fully funded pensions. State fiscal performance in recent biennia has improved, with less reliance on one-time resources and stronger liquidity allowing it to avoid annual cash flow borrowing.

Economic Resource Base

Wisconsin benefits from a diverse economy, although there is some concentration in manufacturing. A key feature of the state's manufacturing sector is its diversity, with relatively little exposure to automotive versus most Midwestern states. The state's growth during much of the current expansion has been slow and uneven, although more recently gains have accelerated. Personal income is average, with the state in the middle of the pack relative to the U.S. Growth has trailed the nation's in most years.

Revenue Framework: 'aa' factor assessment

Wisconsin's sound revenue framework relies on broad-based taxes that have generally reflected economic performance. Future growth is expected to be in line with historical performance. Wisconsin has an unlimited ability to independently raise revenues, providing significant legal flexibility to raise operating revenues as needed.

Expenditure Framework: 'aaa' factor assessment

The pace of spending growth is expected to be slightly above annual revenue growth, reflecting the primary drivers of Medicaid and education, and requiring ongoing spending control. The state benefits from low fixed carrying costs for debt and retiree benefits and has ample ability to cut spending if needed.

Long-Term Liability Burden: 'aaa' factor assessment

Long-term liabilities are low and below the U.S. state median. The state benefits from strong pension funding and a benefit structure that shares the risk of investment underperformance with beneficiaries. Other post-employment obligations are limited.

Operating Performance: 'aa' factor assessment

State fiscal performance in recent biennia has generally improved, with less reliance on one-time resources and stronger liquidity allowing it to avoid cash flow borrowing. Reserves are modest as compared to the state's operating budget although the state maintains considerable flexibility through careful spending management

RATING SENSITIVITIES

The appropriation rating is sensitive to changes in the state's 'AA' IDR, to which it is linked. Wisconsin's IDR is sensitive to the maintenance of structural budgetary balance, while an increase in its resilience and ability to withstand a downturn in the economy would be positive credit factors.

CREDIT PROFILE

The 'AA-' rating on the general fund annual appropriation bonds, one notch below the state's IDR, reflects the state's long-term general credit characteristics and centralization of the lease issuance, budgeting, and payment processes through the Department of Administration. The department is responsible for state debt management and has a long-established history of operating the program. General fund annual appropriation bonds are supported by the state's pledge of annual appropriation.

For further information on the state of Wisconsin, please see Fitch's press release from July 19, 2016, 'Fitch Rates Wisconsin's $317.13MM GO Refunding Bonds 'AA'; Outlook Stable', available at www.Fitchratings.com.

Date of relevant committee: June 23, 2016

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

In addition to the sources of information identified in Fitch's applicable criteria specified below, this action was informed by information from Lumesis and InvestorTools.

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=1009644

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160728006331/en/

Fitch Ratings
Primary Analyst
Karen Krop
Senior Director
+1-212-908-0661
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
or
Committee Chairperson
Marcy Block
Senior Director
+1-212-908-0239
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: [email protected]

Source: Fitch Ratings

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