Eye on Boise: Otter touts Idaho’s upgrade by S&P

BOISE - Gov. Butch Otter took to the national airwaves last week to tout Idaho’s budget management as a “model for what the nation ought to do,” from Medicaid cuts to living “within our means.”

Fox News’ Greta Van Susteren, who interviewed Otter by phone, noted Idaho’s recently upgraded credit rating of AA+, the same level to which the national debt was just downgraded by Standard and Poor’s, from its previous AAA.

Otter responded enthusiastically, not mentioning that Idaho’s upgrade came five months ago.

“Idaho, obviously, with our upgrade, we went to AA+ while the nation was coming down, because we balanced our budget, we saved money when we had a surplus, and we didn’t spend more money than we had during the economic crisis,” Otter declared.

In March, Moody’s upgraded Idaho’s rating from AA2 to AA1, and on March 30, Standard & Poor’s upgraded it from AA to AA+. “That’s one notch below the AAA,” said state Treasurer Ron Crane.

For comparison, Washington state has AA+ ratings from Fitch and Standard & Poor’s and an AA1 rating from Moody’s; and Utah has an AAA rating from Moody’s. S&P upgraded Oregon to AA+ at the same time as Idaho, after that state, too, passed a balanced budget. The lowest-rated state is currently California, which S&P gives an A- and a “negative” outlook; Idaho’s current outlook is “stable.”

Because the Idaho Constitution forbids general long-term debt, that rating applies only to a few areas, including GARVEE bonds for road work and the state’s bond bank. Most of Idaho’s borrowing comes in short-term tax anticipation notes, for which the state long has had the highest rating available from all three rating agencies.

Those short-term debt ratings are key, Crane said. “That translates to every bond that’s issued in the state, all debt from all subdivisions in the state.” As a result, when Idaho did its last issue of short-term tax-anticipation notes in late June, the entire $500 million was snapped up at a highly favorable interest rate of just 26 basis points, or 26 one-hundredths of a percent interest for a year. “That’s virtually free money,” Crane said. “That’s the interest rate we had to pay to borrow, which is really, really a good rate.”

For the mutual funds that are the main buyers of such notes, “When Idaho comes on the market, they know they’re going to get paid back, so they grab it, and it’s really valuable in the marketplace.”

According to Standard & Poor’s, an AAA rating signifies “extremely strong capacity to meet … financial commitments,” while AA shows “very strong capacity,” and “differs from the highest-rated obligors only to a small degree.”

S&P’s March 30 review of Idaho’s credit said, “The rating action reflects our view that the state has demonstrated a commitment to structurally balanced operations during the current low point in the revenue cycle and that it has effectively managed its pension and other post-employment benefit liabilities.” It also cited the state’s practice of building up rainy-day funds, though those are now drained; and its better-than-average economic performance over the past decade.

It added, “The stable outlook reflects our view that the state’s use of revenue assumptions that are conservative relative to the official forecast to build its fiscal 2012 budget may force difficult additional expenditure reductions, but will position the state to find more solid operational footing as the economic recovery takes hold.”

Idaho has dimmest view

Gallup Polls is reporting that Idahoans gave President Barack Obama the lowest approval rating in the nation, at 27 percent, for the first half of 2011. The number of states where Obama’s approval rating was 50 percent or higher jumped to 16 in the first half of 2011 from 12 in 2010.

Overall, the president’s approval rating is at 47 percent, the polling firm reported. Idaho’s 27 percent approval rating falls well below the three next-lowest states, Wyoming, Utah and Oklahoma, which were tied at 32 percent. Washington was at 50 percent.

Canyon GOP backs McGee

The Canyon County Republican Central Committee has rejected a move to investigate Chairman John McGee’s recent DUI, and instead voted 23-6 in favor of a resolution to support the state senator and not address the issue again. McGee told the Idaho Press-Tribune he was “humbled and flattered” by the support, and said he thinks the DUI matter has been put to rest.

The outcome was much different from the Idaho State Republican Central Committee meeting last month, at which, after extended debate, the state committee passed a symbolic resolution declaring “no confidence” in McGee over the incident, while defeating one calling for his resignation as Senate majority caucus chairman.