Michigan, which is making a $195 million contribution to resolve Detroit’s bankruptcy, had its credit outlook lowered to stable from positive by Standard & Poor’s on weaker revenue and slower economic growth.
Michigan’s AA- debt rating is three steps below AAA and S&P’s fourth lowest for a U.S. state. Only Illinois, California and New Jersey have weaker grades. The state plans to issue $86 million in general-obligation bonds as soon as next week, according to offering documents released late yesterday. Rating companies had previously said the sale was $98 million.
The outlook “reflects recent softening in projected fiscal 2014 revenues, expected slow economic growth and anticipated declines in general fund and budget stabilization reserve fund balances,” S&P analyst David Hitchcock said yesterday in a report.
Moody’s Investors Service rates the state Aa2, two steps from the top, with a positive outlook. Fitch Ratings has Michigan at a similar rank, with a stable view.
“The S&P rating remains the same with both Fitch and Moody’s ratings affirmed just this week, too,” said Sara Wurfel, a spokeswoman for Governor Rick Snyder.
S&P said the appropriation from the budget stabilization reserve fund to the Detroit bankruptcy settlement creates questions about how much the state will have to contribute to other distressed localities and school districts.
Flint, Allen Park and Detroit Public Schools are among those currently under emergency managers, according to the website of the Michigan Department of Treasury.
To contact the editors responsible for this story: Stephen Merelman at email@example.com Pete Young, Jeffrey Taylor