Governor Walker’s Statement on Negative Watch of State Credit Ratings [2017] - P.O.W. Report

Tuesday, June 20, 2017

Governor Walker’s Statement on Negative Watch of State Credit Ratings [2017]

Standard & Poor’s cites reliance on savings, lack of new revenues, budget impasse

June 20, 2017 JUNEAU— Governor Bill Walker reacted to Standard & Poor’s (S&P) announcement today that Alaska’s credit ratings are being placed on negative CreditWatch. The report cites the lack of a budget for fiscal year 2018, continued reliance on savings to pay for government services, and a lack of new revenues as reasons for the negative outlook. The move means Alaska’s AA+ general obligation (GO) bond rating is in danger of being lowered yet again if a complete fiscal plan is not adopted this year.

“Today’s announcement from S&P is both concerning and disappointing—but not surprising,” Governor Walker said. “The agency’s analysts note that we are continuing to drain our savings at an alarming rate, and have not yet enacted a fiscal plan. It is critical that we pass an operating budget for next year, and adopt a fiscal plan that does not continue our over-reliance on savings. I remain hopeful that we will be able to pull together and pass a budget and complete fiscal plan to secure Alaska’s future, and demonstrate that we take our finances and budget issues seriously. Alaskans are depending on us.”

Much like a credit score affects an individual’s ability to buy a house or car, the ratings from S&P and other agencies impact the state’s ability to build a stronger Alaska through infrastructure and other capital projects. The negative CreditWatch indicates that S&P is concerned about Alaska’s fiscal stability, and if the ratings are lowered, could cost the state millions of dollars in additional interest payments.

S&P’s announcement comes days after Governor Walker called the 30th Legislature into its second special session to focus initially on passing an operating budget so that government services can continue past July 1 of this year. In addition to the GO bond, S&P also placed Alaska’s AA appropriation rating and A+ moral obligation rating on negative CreditWatch.

Timeline of Alaska’s Credit Ratings

· March 3, 2015 – Moody’s, S&P, and Fitch Ratings separately affirm Alaska’s AAA bond ratings
· November 2, 2015 – S&P optimistic Alaska will enact long-term, structural reforms to close $3.5 billion deficit
· January 5, 2016 –S&P lower Alaska’s credit rating to AA+ negative, citing declining oil prices and a lack of adoption of a comprehensive fiscal plan
· February 29, 2016 – Moody’s lower Alaska’s credit rating to Aa1 negative, again citing low oil prices, declining savings, and lack of a complete plan.
· June 14, 2016 – Fitch lowers Alaska’s credit rating to AA+, citing lack of a complete fiscal plan.
· July 25, 2016 – Moody’s again lowers Alaska’s credit rating to Aa2, citing inability to address structural fiscal challenges, and lack of a complete fiscal plan.

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