INDIANAPOLIS (August 14, 2006) - Moody's Investors Service has upgraded the State of Indiana's credit outlook from negative to stable for the first time in five years. The independent credit rating service issued its statement today.

"The markets are recognizing our efforts to reduce overspending, repay our debts and build the Indiana economy. This ratings improvement could help reduce borrowing costs for Hoosier schools and communities," said Governor Mitch Daniels.

Moody's has rated the state as Aa1 (negative) since December 2001, and has revised the outlook to Aa1 (stable). Earlier this year, Standard & Poor's Ratings Service upgraded the state's credit rating to AA+ from AA.

The service revised its outlook for the state as it assigned a rating for an Indiana Finance Authority bond issuance scheduled for the week of August 21 to refinance commercial notes previously issued for construction of a new state criminology lab for the Indiana State Police and Indiana Department of Health.

In its report, Moody's cited the state's diversifying economy and employment levels, a balanced budget, and repayments to K-12 schools and local governments as reasons for the outlook upgrade.

The Moody's report said, "The state ended fiscal 2006 with a general fund annual surplus of $370.4 million, its first balanced budget in eight years. Based on the enacted budget, the state expects to end fiscal 2007 with an annual surplus of more than $230 million. Spending growth has been reined in, with general fund expenditures increasing by 1.9% in fiscal 2006 and budgeted to grow by 2.8% in fiscal 2007."

The report also acknowledged the state's efforts to reverse payment delays. "During the fiscal downturn, Indiana employed several one-time tactics to shore up the budget. These included delaying aid payments to local governments, school districts and higher education institutions, with a liability peaking at more than $1 billion. Now, with a positive budget balance and improved revenues, the state is reversing those actions," the report said.

The report is posted on the Moody's Web site at: www.moodys.com.