Fitch Ratings affirms the underlying rating on the following outstanding obligations of Fort Bend Independent School District, Texas (the district) as part of its continuous surveillance efforts:

--$963.4 million unlimited tax (ULT) bonds at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by an unlimited ad valorem tax pledge of the district. In addition, the bonds are secured by the Texas Permanent School Fund (PSF), whose bond guarantee program is rated 'AAA' by Fitch.

KEY RATING DRIVERS

STRONG FINANCIAL PROFILE: The district's financial profile is a positive credit factor, characterized by large reserve levels and a consistent record of conservative budget practices.

STABLE AND DIVERSE ECONOMY: The local economic climate is favorable and continues to demonstrate low unemployment, high wealth levels, and a healthy local housing market despite the national recession.

HEALTHY GROWTH CONTINUES: Steady growth has been exhibited in both the district's tax base and student enrollment, and housing construction continues in the area. Growth in taxable assessed valuation (TAV) has slowed somewhat due to recessionary pressures but has still maintained a positive trend. A recent study by the district's external demographer projects that the district's enrollment growth will continue at an annual rate of 1%-2%, which is in line with historical growth.

ELEVATED DEBT BURDEN: The district's overall debt burden is high, but Fitch believes the debt load currently is manageable due to the district's high wealth levels, relatively low carrying costs, ample new issuance tax rate cap margin, and reasonable prospects for continued growth of the tax base.

CREDIT SUMMARY

STABLE FINANCIAL PERFORMANCE

The district's financial position is strong, as evidenced by an audited fiscal 2011 unrestricted general fund balance (committed, assigned and unassigned balances per GASB 54) of $137 million (30% of spending). Fund balances have exceeded 20% of spending for each of the past 10 fiscal years, maintaining a high degree of financial flexibility through two national recessions. Recessionary pressures and state funding reductions led the district in fiscals 2010 and 2011 to proactively declare financial exigency, a Texas Education Agency prerequisite for terminating contracted employees. This action allowed the school district to eliminate nearly 1,000 positions (approximately 10% of its workforce) to close a $22 million budget gap. Following the cuts, the district continues to operate below state-recommended student-teacher ratio limits.

Historically, the district's proactive administrators have prudently managed resources to sustain a healthy financial profile; this track record largely mitigates concerns over the recent budgetary challenges. The district's increased fund balance reserve policy - to three months from 20%, or about 2.5 months - indicates management's commitment to maintain its historically strong financial profile. Break-even results or a modest drawdown are expected for the close of fiscal 2012. Preliminary plans for the fiscal 2013 budget include a return to formula funding which is anticipated to allow continued growth to the district's revenue base, resulting in balanced operations and maintenance of the strong fund balance.

DESIRABLE RESIDENTIAL COMMUNITY

Located in northeastern Fort Bend County, the district is in a rapidly growing residential and commercial sector of the Houston metropolitan statistical area (MSA). Fort Bend County's population, estimated at 585,375 in 2010, has grown by 65% since the 2000 census population count of 354,452. Despite the slowdown in home sales, the median home price in the Houston MSA has held steady at about $150,000 and experienced very modest swings in prices since 2005. The county's unemployment rate of 7.0% in November 2011 is well below the state (7.5%) and national averages (8.2%) for the same period. In addition, the labor force grew 1.9% year-over-year in November. Wealth levels of the county's population are notably higher than those for the Houston MSA, state, and nation.

Enrollment and the tax base have expanded in recent years, and continued growth is anticipated. Student enrollment has grown at a rate of 1%-2% over the past five years, and the district's external demographer has recently forecast that trend to continue at the same rate over the next 10 years. The district's fall 2011 enrollment was approximately 69,200 students. Given recent history and the comparatively strong regional economy, Fitch believes this forecast is reasonable.

The district's TAV has expanded at a compound annual rate of 6.4% over the past five fiscal years; growth has been more modest in recent years due to the impact of the recession on homebuilding and property values. Total market value for fiscal 2012 is $27.3 billion, and TAV totals $23.9 billion (a 0.5% increase from fiscal 2011). Fitch housing data indicate that the Fort Bend County housing market is performing well relative to other markets in terms of new starts and housing prices.

ELEVATED DEBT BURDEN

The district's overall net debt burden is high at over 10% of fiscal 2012 market value and $7,800 per capita. The high overall debt load includes a large number of special districts in the area. Payout is relatively slow at 37% repaid in 10 years, though not uncommon among high-growth Texas school districts. The district has maintained a very low debt-service tax rate (currently $0.30 per $100 of TAV), well below the attorney general's tax rate cap for new debt issuance of $0.50 per $100. The debt burden is expected to remain manageable given the flat amortization schedule of existing debt, the below-average carrying costs (13% of General Fund spending), anticipated population and tax base growth, and moderate near term capital needs.

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.

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com, National Association of Realtors, and the Municipal Advisory Council of Texas.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 15, 2011);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).

Applicable Criteria and Related Research:

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

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.