The Rating Outlook is Stable.
The bonds are general obligations to which the state pledges its full faith and credit.
KEY RATING DRIVERS
LOW DEBT: The state's debt burden remains low despite significant growth-related capital needs, especially for transportation. Amounts for debt service are constitutionally dedicated.
GROWTH-ORIENTED ECONOMY: The state's economy is large, diverse, and is growing rapidly relative to national averages. The state's energy industry remains a significant source of economic activity and is subject to volatility.
SIGNIFICANT RESERVE BALANCES: Financial operations are generally conservative. The state has built a sizable budget reserve, with a portion of natural resource receipts dedicated to funding it.
SALES TAX DEPENDENCE: Finances are dependent on consumption-based (primarily sales) taxes, and volatile energy taxes are also important.
GROWTH-RELATED SPENDING PRESSURES: Longer term fiscal pressures stem from having to adequately fund the state's rapid growth. This includes expanded transportation needs, school funding, and water needs.
ECONOMIC GROWTH AND HIGH RESERVES: The state's GO rating and Stable Rating Outlook assume the maintenance of high reserve balances and continued economic growth. The rating could be pressured in the event of severe revenue weakness, including stemming from cyclicality in the state's large energy sector, or unwillingness to address potential fiscal challenges in an effective and timely manner.
The state's long-term 'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that continues to outpace national averages. Financial pressures arise from the demands placed on the state's consumption-based tax system by its rapid growth, including transportation, education and water needs.
DEBT AND OTHER LIABILITIES
Funded ratios for the state's two major pension systems declined given investment losses in the last downturn, and annual contributions have been consistently below actuarially calculated levels. As of
The 2013 state legislature increased employer contributions for the employees' system, although contributions remain below the level needed to amortize the liability in 30 years. The legislature also adopted teacher plan reforms, including a higher retirement age and phased increases in member, state and district contribution rates; the changes bring amortization of the teachers system to below 30 years. The state reports the teacher system liability as a state obligation.
Finances are generally conservatively managed, though challenges include sustainably addressing long-term growth needs and managing the cyclicality inherent in the state's energy-dominated economy. The state maintains fiscal flexibility both in the form of its rainy day reserve (the economic stabilization fund (ESF), as well as in its demonstrated willingness to make deep spending cuts to maintain budget balance. The ESF benefits from the constitutional dedication of a share of oil and gas production taxes, as well as unencumbered balances at fiscal year-end. As of
Actual revenues during the fiscal 2012 - 2013 biennium performed consistently stronger than assumed at budget adoption, in spring 2011, with the state raising its forecast accordingly. The comptroller's
With a rapidly growing ESF balance from strong energy tax performance, the adopted budget diverted portions of ESF resources for other state needs. In addition to the
Additionally, a proposed constitutional amendment diverting half of future incremental oil and gas taxes dedicated to the ESF to instead support highway funding will be put before voters in
Actual revenue performance through
The state's economy has expanded rapidly and diversified over the last two decades, although the cyclical energy sector still represents a large share of economic activity. Population growth is very rapid, rising nearly 27% since 2000 (compared to 12.3% nationally). The state outperformed the nation into the last downturn given growth-related momentum and strong energy sector performance in 2007 and 2008, and has continued to outpace the nation since the recovery started.
Employment in 2012 and 2013 in
The state forecasts continued gains in economic performance through the current biennium, although at a slower pace compared to the pace immediately following the recession. Gross state product is forecast to rise 5.2% and 5.3% in 2014 and 2015, while employment rises 3.3% in 2014 and 2.9% in 2015. Current forecast indicators are somewhat higher than the level forecast by the comptroller in
Fitch Ratings affirms the following rating linked to the GO rating of the state:
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the 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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