State Treasurer Duane Davidson announced today that the three national debt rating agencies have reviewed Washington’s financial situation and have confirmed the existing ratings for the State’s Long Term General Obligation (GO) bonds.
Washington has very strong ratings: Fitch AA+ with stable outlook, Moody’s Aa1 with stable outlook and S&P AA+ with stable outlook. The ratings and outlook are all unchanged from the last time the agencies reviewed Washington’s outlook last December. The agencies finished their current analysis at the end of August 2017.
A state’s bond rating serves a similar purpose to a person’s credit ratings. Having a better rating should decrease the interest charged on debt. The State Treasurer’s Office requested that Washington’s ratings be reviewed in anticipation of new Washington GO bonds being issued on September 26th.
All three agencies recognized Washington’s robust economy. Moody’s rating took into account, “…the state’s sound management practices such as its quarterly consensus revenue forecasting process, multi-year revenue and expenditure projections, timely budget adoption, and demonstrated willingness to address budget shortfalls. The rating also reflects an economy that is growing and expected to outperform the nation over the long term.” They also cautioned, “These strengths are tempered by exposure to the cyclical aerospace industry and other export markets, and above average debt ratios.”
Treasurer Davidson is also concerned about the state’s debt ratios. His office will author a new “Debt Affordability Study” in late 2017. This study will be for Washington Legislators and citizens to explain the cost and amount of the state’s debt.
Among S&P’s observations are that Washington has had, “Good recent economic growth relative to the nation and sales tax-based revenue structure, which has demonstrated less sensitivity to economic cycles than income tax-reliant states.” S&P also recognized Washington’s moderately high per capita debt burden but said it is partially offset by a relatively low unfunded public pension liability.
Treasurer Davidson remarked, “I’m pleased that the rating agencies all continue to recognize Washington’s diverse and growing economy. This is a true vote of confidence in Washington’s current and future ability to pay its debts. We’ll now work to get the best rates possible on upcoming Legislatively authorized debt for transportation and capital projects.”