State Credit Ratings

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State Credit Ratings
Robin Prunty, Director Standard Poors State
and Local Government Group
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State Credit Ratings

• State Credit Sector Has Been Volatile Since 2001
• -5 Downgrades
• -11 Negative Outlooks Currently
• -1 Upgrade
• Despite Volatility, Remains SPs Most
  Creditworthy Sector

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U. S. State Ratings Distribution
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State Ratings
Puerto Rico A-
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Southeast State Ratings

• Southeast states have an above average credit
  profile relative other regions.
• Six of SPs ten AAA ratings are in the
  Southeast Region.
• Two of five state downgrades have been in the
  region however (Kentucky and Tennessee).
• There are no Southeast states on negative outlook
  currently.

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Southeast Tax Performancevs. U.S.

• Percent Change in Tax Revenue
• FY 2001 to FY 2002
• Personal
  Corporate Sales and Total
• Income Tax
  Income Tax Use Tax Tax
• United States -12.2
  -19.9 0.7 -6.3
• Southeast -4.1 -12.4
  1.7 -1.3

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Nominal Real Annual Budget Increases Fiscal
1979 to Fiscal 2003
Source National Association of State Budget
Officers
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Southeast State Spending

• Spending reductions continue to be the primary
  budget balancing strategy.
• Although general fund spending for all states
  averaged only 1.3 in 2003, ten of twelve states
  in the southeast increased spending above this
  average. Nominal spending in the Southeast
  increased by 3.6 on average.

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Total Year End State Fund Balances1990 2003







Source National Association of State Budget
Officers
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Top Five Ways To Protect Your Bond Rating

• Adopt a structurally balanced budget. A
  multi-year budget plan is optimal..
• Have a clearly defined financial/budget reserve
  policy.
• Have regular (non-partisan preferably) economic
  and revenue reviews in order to develop a
  reasonable revenue forecast and to identify
  potential shortfalls early.
• Prioritize spending plans and establish
  contingency plans for operating budgets. Both the
  practical and legal framework for implementing
  mid-year budget adjustments has been an important
  credit consideration.
• Have a well defined debt affordability model or
  capital plan to evaluate your future debt profile.