OREANDA-NEWS. Fitch Ratings has assigned an 'AAA' rating to the following State of Texas general obligation (GO) bonds to be issued by the Texas Public Finance Authority (TPFA):

--$445,000,000 State of Texas GO and refunding bonds, taxable series 2015C.

The bonds are expected to sell via negotiated sale on or about Oct. 14.

The Rating Outlook is Stable.

SECURITY

The bonds are general obligations to which the state pledges its full faith and credit.

KEY RATING DRIVERS

LOW DEBT: Texas' debt burden remains low despite significant growth-related capital needs, especially for transportation. Amounts for debt service are constitutionally dedicated.

GROWTH-ORIENTED ECONOMY: The state's economy is large, diverse, and continues to grow at a solid pace despite recent energy industry slowing. The state's oil and gas sector remains a significant source of economic activity and is subject to volatility.

SIGNIFICANT RESERVE BALANCES: Financial operations are generally conservative. The state maintains a sizable budget reserve, with a portion of natural resource receipts dedicated to funding it.

SALES TAX DEPENDENCE: Finances are dependent on consumption-based (primarily sales) taxes; volatile energy taxes are also important.

GROWTH-RELATED SPENDING PRESSURES: Longer term fiscal pressures stem from having to adequately fund the state's rapid growth. This includes expanded transportation, school funding, and water needs.

RATING SENSITIVITIES

ECONOMIC GROWTH AND AMPLE FLEXIBILITY: Texas' 'AAA' GO rating and Stable Outlook assume continued economic gains and the maintenance of ample fiscal flexibility both in its conservative approach to budget management and its high reserve balances. The rating could be pressured in the event of the state's unwillingness to address potential fiscal challenges in an effective and timely manner.

CREDIT PROFILE

Texas' long-term 'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that has outpaced national averages through most of the current expansion. The oil price plunge that began in late 2014 has slowed the state's economic and revenue momentum, although broader gains continue despite modest weakness in some regions and sectors.

Fitch believes that the state has ample flexibility to absorb near-term economic and revenue volatility, both in the form of its very large reserve balances and a tradition of taking budgetary actions to maintain balance. Liquidity is ample, and the state is not undertaking cash flow borrowing in fiscal 2016 to meet intra-year cash needs for the first time in decades. The state has been a leader in economic growth for decades, diversifying Texas' economy well beyond the resource sectors that were dominant during the last severe oil price shock, in the 1980s. A rapidly expanding population and the concomitant demand for public services, including for transportation, education and water, continue to pose a long-term fiscal pressure.

Texas' GO bonds are payable from a constitutional appropriation out of the first moneys coming into the state treasury not otherwise appropriated. This unrestricted balance equaled nearly $48 billion as of Aug. 31, 2014, the end of fiscal 2014.

The TPFA is a state agency that issues GO bonds, commercial paper (CP) notes, lease obligations and revenue bonds on behalf of multiple state agencies and higher education institutions, subject to state legislative authorization. As of Aug. 31, 2015, the TPFA had approximately $2.3 billion in outstanding GO bonds and CP.

Outstanding TPFA borrowing includes $716 million in bonds and CP issued for the Cancer Prevention and Research Institute of Texas (CPRIT), a state research institution for which $3 billion in GO bonds were authorized by voters in 2007. Proceeds of the current sale will refund outstanding GO CP notes issued by TPFA on behalf of CPRIT, as well as to provide additional resources for CPRIT for research grants associated with the institute's mission.

For additional information on the GO rating of the State of Texas, please see Fitch's press release dated Aug. 28, 2015, 'Fitch Rates Texas $1 Billion GO Mobility Fund Bonds 'AAA'; Outlook Stable,' which is available at 'www.fitchratings.com'.