FITCH RATES NEW HAMPSHIRE'S $100MM GO BONDS 'AA+'

Fitch Ratings-New York-18 October 2011: Fitch Ratings has assigned an 'AA+' rating to the State of New Hampshire's general obligation (GO) capital improvement bonds consisting of: --$100 million 2011 series B The bonds are expected to sell Oct. 20, 2011 via competitive sale. Fitch also affirms the 'AA+' rating on New Hampshire's approximately $939 million outstanding GO bonds, including bonds issued by the Pease Development Authority. The Rating Outlook is Stable. KEY RATING DRIVERS New Hampshire's economy had been strong and resilient when compared to surrounding states coming into the economic downturn and strong growth is expected to return as the national economy recovers. New Hampshire benefits from high education and wealth levels, low unemployment, and above average job growth, offset to some extent by slow population growth and an aging demographic profile. With no sales or income tax, the state's finances are dependent on an unusual mix of taxes business taxes, real estate transfer taxes, cigarette and alcohol taxes, etc., which are economically sensitive and underperformed through the economic downturn. Only modest growth is expected in the current biennium. The state takes timely action to maintain budgetary balance. The enacted budget includes reductions to local governments, a significant shift in how hospitals are reimbursed for indigent care, flat funding of K-12 education and higher education cuts, as well as other program consolidations and reductions. Debt levels are low, amortization is rapid, and net tax-supported debt is entirely general obligation. Pension funding has declined dramatically over the past ten years and represents a future spending pressure. SECURITY General Obligation, full faith and credit of the state of New Hampshire CREDIT PROFILE The 'AA+' reflects New Hampshire's economic strength and resiliency and conservative debt position. New Hampshire's economy compared favorably to surrounding states coming into the economic downturn and seems to be emerging from the recession at a faster pace as well. These strengths are offset partly by the state's dependence on a variety of volatile taxes, which did not perform well during the recession and are expected to grow only modestly despite the state's economic recovery. New Hampshire's debt structure is conservative with low debt levels, rapid amortization, and reliance on fixed rate GO or guaranteed debt. Net tax-supported debt represents a low 1.6% of 2010 personal income, reflecting the historically limited role of state government. The current offering will finance a portion of the state's annual capital improvement program. Funding of the state's pension system has declined significantly over the past decade. As of June 30, 2010 the state's pension system funded ratio was 58.5%, down from 89.9% in 2000. This already low funding level may decline with changes in actuarial assumptions, including a lowering of the investment return from 8.5% to 7.75%. Improving its actuarial position will present a future spending pressure. The

state fully funds the ARC and is responsible for approximately one-quarter of the total pension liability. New Hampshire is a prosperous state that has shifted rapidly from manufacturing to services, as its economy has become more like the nation's. The state's population and job growth have generally outpaced New England's since 1980, benefiting from the expansion of Boston suburbs into New Hampshire and growth in the trade, transportation and utilities and other services sectors. The state did not lose jobs year-over-year during the recent recession until December 2008 and employment losses remained below the national rate through the recession, with non-farm employment down 3.4% in 2009 versus 4.4% nationwide and down 0.5% in 2010 versus a decline of 0.8% nationwide. Job growth has resumed, up 1.9% in August 2011, higher than the U.S. growth rate of 1.0%. Although unemployment levels have increased significantly, the unemployment rate remains well below the national average at 5.3% in August 2011 versus 9.1% for the U.S. Per capita personal income is 109% of the nation's, ranking New Hampshire ninth among the states. New Hampshire's tax structure, specifically its lack of a personal income or general sales tax, differentiates it from all other states except Alaska and is a key influence on financial operations. The state relies on business, real estate, and excise taxes, as well as a statewide property tax dedicated solely to education. This unique tax structure is volatile, especially the taxes on business profits, which are vulnerable to swings in the business cycle, and on real estate transfers, which are sensitive to housing market conditions. The tax structure makes it difficult for the state to take advantage of the economic recovery as revenues are only expected to grow modestly despite growth in employment. Unaudited revenues for fiscal 2011 were 1.4% lower than in fiscal 2010, and down 5% from the original plan. Major revenue sources either declined or showed just modest growth. Business taxes fell 3.9% in fiscal 2011 after growing an equivalent amount in fiscal 2010. Meals and rooms tax revenue increased 1.3% year-over-year while tobacco taxes fell 6.9%. The enacted budget for the fiscal 2012 - 13 biennium assumes growth in base revenues of just .8% in fiscal 2012 and 1.6% in fiscal 2013, and relies primarily on expenditure reductions, cuts or cost increases to local governments, and shifts in funding to achieve balance. Net appropriations are approximately 1% less than actual expenditures in the prior biennium. The budget requires a $50 million reduction in compensation and benefit expenses, including a $20 million reduction in the general fund. These cost savings are expected to be derived from reducing funded positions, including through lay-offs, flat funding of employee health care costs, increases in employee contributions for health insurance, and a freeze in pay increases. Local governments will face both reduced revenues and increased expenditures as revenue sharing is suspended for the second consecutive biennium, and a long-standing state subsidy of pension contributions is eliminated. Prior to fiscal 2010, the state paid 35% of the local government required pension contribution. The subsidy was reduced in the fiscal 2010-2011 biennium and eliminated in the current biennium, saving the state $171 million over the biennium. The K-12 education funding formula is flat funded at $940 million per year but does not fund $100 million of prior legislative changes to the formula. Higher education funding is reduced over $105 million. Additional budget gap closing measures include a significant shift in how hospitals are reimbursed for uncompensated (indigent) care, with a redirection of approximately $158 million in Medicaid enhancement tax revenue from the disproportionate share hospital program to the general fund for Medicaid provider payments. Cost savings will also be derived from consolidation in health and human services programs and a shift to managed care for Medicaid. Having depleted its rainy day fund in fiscal 2009, the state has minimal reserves, a concern given the state's revenue system, but one that is mitigated by the state's proven willingness and ability to achieve budgetary balance. Contact: Primary Analyst: Karen Krop Senior Director

+1-212-908-0661 One State Street Plaza New York, NY 10004 Secondary Analyst: Ken Weinstein Senior Director +1-212-908-0575 Committee Chairperson Laura Porter Managing Director +1-212-908-0575 Media Relations: Sandro Scenga, sandro.scenga@fitchratings.com. New York, Tel: +1 212-908-0278, Email:

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria' (Aug. 15, 2011); --'U.S. State Government Tax-Supported Rating Criteria' (Aug. 15, 2011). Applicable Criteria and Related Research: Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898 U.S. State Government Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648897 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.