Minnesota had $5.1 billion of top-rated general-obligation debt downgraded one step to AA+ by Standard & Poor’s, which cited “continued structural imbalance” in the state’s budget.
S&P also assigned an AA+ rating and stable outlook to $921.7 million in Minnesota general-obligation bonds, the service said in a release. The Midwestern state of 5.3 million people is selling the debt Sept. 27, John Pollard, a spokesman for the Minnesota Management and Budget office, said in an e-mail.
“The downgrade reflects what we view as the state’s ongoing reliance on nonrecurring measures to balance its budget,” Robin Prunty, an S&P credit analyst, said in a release.
The downgrade leaves eight states with AAA general-obligation ratings from S&P. South Carolina was the last to lose its top rating, in July 2005, according to an e-mail from Ola Fadahunsi, a spokeswoman for the ratings company.
After a budget impasse, Minnesota ended a 20-day government shutdown in July with an agreement among Democratic Governor Mark Dayton and Republican legislative leaders that involved delaying aid to schools and selling tobacco bonds. Those moves and the use of reserves account for two-thirds of the deal to address an estimated $5 billion gap, S&P said.
Moody’s Investors Service assigned an Aa1 rating, second highest, with a negative outlook to the general-obligation bonds the state is selling next week, according to a release. Moody’s cited “reliance on one-time measures” to balance the budget.
Fitch Ratings downgraded about $5.7 billion in Minnesota general-obligation bonds to AA+ from AAA on July 7 in part because of the state’s reliance on one-time funding sources.
The states with top general-obligation ratings from S&P are Delaware, Florida, Georgia, Maryland, Missouri, North Carolina, Utah and Virginia.