State’s budget troubles lead to lower debt ratings
OLYMPIA – Two agencies have changed the outlook for Washington’s debt ratings from stable to negative, citing the state’s ongoing budget troubles.
Moody’s Investors Service said in its rationale released Monday that the state faces challenges in fixing structural budget problems, noting that Washington faces a revenue shortfall at a time when other states are reporting no budget problems or only minor gaps.
“The outlook revision to negative from stable reflects the magnitude of the revenue falloff that continues to challenge the state as it struggles to recover from the recession,” Moody’s statement said.
Fitch Ratings has also changed its outlook from stable to negative, releasing its explanation in a note Friday.
Moody’s has an Aa1 rating on Washington’s general obligation bonds, and Fitch’s rating is AA+. Each is one notch below the best possible rating.
Moody’s noted that the state’s reliance on a sales tax has made it challenging during a recession that has impacted consumer confidence. The agency cited other challenges, including reliance on the cyclical aerospace industry, above-average debt ratios and frequent voter initiatives that add to budget challenges.
Washington lawmakers are working to close a roughly $1 billion budget deficit and want to leave several hundred million dollars as a buffer.
“As recognized by the rating agencies, the Legislature has historically done an excellent job in making budgetary adjustments to meet revenue shortfalls,” said Washington state Treasurer James McIntire. “We fully expect them to do the same now.”
Standard & Poor’s has a stable outlook on Washington’s debt.