One of the big three New York bond rating agencies has improved its outlook on the state of Minnesota’s fiscal condition. Moody’s Investors Service revised its view of Minnesota’s financial status to “stable” from “negative,” which had been its view of the state since August of 2011.
Moody’s credit rating for Minnesota remains at Aa1, which it set as a downgrade from AAA in 2003. The two other rating agencies, Fitch and Standard & Poor’s, both downgraded Minnesota’s rating in 2011 from AAA to AA+. The cause of the downgrades was state lawmakers’ use of one-time, rather than permanent, sources of funding to solve the recurring budget deficits during the last economic recession. Minnesota Department of Management and Budget Commissioner Jim Schowalter said Moody’s decision happened in part because of the permanent revenue that was passed by lawmakers to fund the state’s 2014-2015 budget.
“We have turned a corner,” Schowalter said. “This action affirms that the state’s financial management is headed in the right direction. The state has a balanced budget, a projected structural balance in the out years, has filled the cash flow and budget reserve accounts and repaid two-thirds of the previous education shifts. The recently passed biennial budget did the job to balance a projected deficit without the use of one-time measures.”
In its rationale for revising the state’s status to “stable,” Moody’s credited the state’s “fundamentally diverse and stable economy” as a reason for its positive revenue trends. It also said the state has “strong financial tools,” including its economic forecasting, manageable debt load and the governor’s emergency budget cutting authority known as unallotment.
The state has $5.7 billion in outstanding general obligation debt. The state’s next bond sale is planned for Aug. 6 and will include $265 million in general obligation bonds and $200 million in trunk highway bonds.