The bonds are expected to sell via negotiated sale the week of
In addition, Fitch affirms the following outstanding ratings:
The Rating Outlook remains Negative.
GO bonds to which the full faith and credit of the state will be pledged for payment of principal and interest.
KEY RATING DRIVERS
NEGATIVE OUTLOOK BASED ON BUDGET VULNERABILITY: The Negative Outlook reflects the state's reduced fiscal flexibility at a time of lingering economic and revenue uncertainty. The adopted budget for the current biennium relied on one-time items and anticipated little near-term progress in rebuilding fiscal flexibility. Personal income tax (PIT) revenues have been volatile in the first year of the biennium, with the state taking proactive action to ensure a modest fiscal 2014 budgetary surplus to be deposited to the rainy day fund.
HIGH WEALTH LEVELS:
CYCLICAL REVENUES AND SPENDING PRESSURE: State revenue performance is cyclical, while high fixed costs limit its ability to respond during revenue downturns.
HISTORICAL WILLINGNESS TO BUILD BALANCES: During past economic recoveries the state has demonstrated a willingness and ability to rapidly repay deficit borrowing and rebuild its rainy day balance. The current slow recovery has hampered rebuilding of reserves in the current biennium.
HIGH DEBT: Tax-supported debt is high for a U.S. state. Most GO bonds, excluding GO bonds issued to fund the teachers' retirement system, amortize rapidly.
SIGNIFICANT PENSION OBLIGATIONS: Unfunded liabilities for employees are significant, including for state employee and teacher pensions. The state fully funds actuarially calculated pension contributions and maintains a fixed amortization date. Additionally, the state has taken steps to reform retirement pension and health liabilities.
VULNERABILITY TO ECONOMIC AND REVENUE CHALLENGES: An inability to meet or exceed budgeted forecast expectations could lead to a downgrade.
SUCCESS IN RAISING RESERVE BALANCES: Improved fiscal flexibility provided by higher than forecast revenues and material progress in rebuilding reserves could stabilize the state's credit outlook.
Revenues in the first half of fiscal 2014 surged, with solid year-over-year gains in PIT collections prompting the state to elevate its forecast expectations. Following disappointing spring 2014 PIT collections, the state has reversed course, lowering forecast revenue growth and agreeing to a modest package of mid-biennium budget adjustments to ensure a
The state remains the wealthiest as measured by personal income per capita, at 137% of the national average in 2013. Personal income growth in recent quarters continues at levels below the national average; fourth-quarter 2013 growth was 1% year-over-year in
The state's revised economic outlook through fiscal 2018 appears reasonable, in Fitch's view. It foresees improving performance after recent sluggish growth; gross state product gradually accelerates in 2014 and 2015 generally in line with national forecast expectations. Employment growth continues at a below-average level through the period, rising 0.8% in 2014 in the state compared to 1.7% nationally.
RECENT FISCAL PERFORMANCE
The lingering slow recovery has stymied a full recovery from the last recession. To close persistent budgetary gaps in the fiscal 2008-2009 and 2010-2011 biennia, the state relied on spending cuts, tax rate changes and non-recurring resources, including federal stimulus funds and
Fiscal 2013 began with revenue underperformance that required rescissions and other balancing actions. Revenue collections turned around late in the fiscal year, with higher PIT receipts, including from the timing impact of federal tax law changes, enabling the state to make a sizable deposit to the BRF to bring its balance to
The fiscal 2014-2015 biennium adopted budget relied on a number of one-time measures to achieve narrow forecast surpluses of
Fiscal 2014 PIT collections were well ahead of expectations in the first half of the year, although spring 2014 collections were significantly lower than forecast, with the state attributing volatility to the impact of 2013 federal tax rate changes on the timing of tax filings. The state's forecast surplus, which had risen to more than
DEBT AND OTHER LIABILITIES
Funding levels for the state's major pension systems remain a source of concern. As of
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from
--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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