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N.Y. State Raised 1 Step by Moody’s After Timely Budgets

New York Governor Andrew Cuomo, a 56-year-old Democrat running for re-election in November, has closed more than $10 billion in projected budget gaps since taking office in 2011. Photographer: Richard Drew/Pool/Getty Images
New York Governor Andrew Cuomo, a 56-year-old Democrat running for re-election in November, has closed more than $10 billion in projected budget gaps since taking office in 2011. Photographer: Richard Drew/Pool/Getty Images

June 16 (Bloomberg) -- New York state’s credit rating was raised to the second-highest level of investment grade by Moody’s Investors Service after Governor Andrew Cuomo won his fourth consecutive on-time budget.

The rating company said the state deserved the one-step increase to Aa1, its highest ranking since at least 1975, because of improved financial stewardship. In March, New York approved a budget before the April 1 start of the fiscal year, marking the first time the state has produced four straight timely plans since 1977.

The change reflects “sustained improvements in fiscal governance, the strength of the recent economic recovery, a strong financial position reflected in improved reserves and reduced spending growth,” Moody’s said today in a report.

Cuomo, a 56-year-old Democrat running for re-election in November, has closed more than $10 billion in projected budget gaps since taking office in 2011. At the same time, he’s kept spending growth limited to 2 percent annually, helping to produce the first surplus since 2008 last year.

“This upgrade is in part a product of four on-time budgets, our work to make the state work once again, and our focus on economic development,” Cuomo said in an e-mailed statement.

Like AAA

Investors in the $3.7 trillion municipal bond market have been treating New York like a top-rated state.

New York state general obligations maturing in March 2023 changed hands today before the upgrade at an average yield of 2.19 percent, or about 0.02 percentage point less than benchmark AAA munis, data compiled by Bloomberg show. The tax-exempt securities have traded in line with top-rated debt since May 29, the data show.

“New York has by and large done a very good job, and the state G.O. debt has traded pretty well” as a result, said Clark Wagner, director of fixed income at First Investors Management Co. in New York, which oversees $1.5 billion in munis. The state’s ability to pass the on-time budgets demonstrates its fiscal responsibility, he said in an interview.

Cuomo has said the on-time performance shows that Albany has moved past the dysfunction that previously defined it. In 2010, the budget process didn’t finish until August, the tardiest since lawmakers took a record 133 days into the 2004 fiscal period to approve a plan.

The first three deals Cuomo brokered closed deficits in part by getting the state’s largest unions to agree to wage freezes. The budget approved in March posed a different challenge as the governor sought to lay out a multiyear plan that spends a surplus on tax cuts before the state has the cash on hand.

Standard & Poor’s has said for almost two years that if New York produced on-time balanced spending plans through 2014, it would probably raise the state’s rating from AA, third highest. That would be the best credit grade from S&P since New York was cut from AAA in 1972.

To contact the reporters on this story: Freeman Klopott in Albany at fklopott@bloomberg.net; Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Pete Young, Jeffrey Taylor

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