HONG KONG ALSO DROPS A NOTCH
Fitch Ratings downgraded Alaska’s general obligation bond rating from AA to AA1 on Thursday, as it warned it would do months earlier if spending continued to exceed revenue.
The message from Fitch is that the State doesn’t have its fiscal house in order. The Legislature has continued since 2013 to appropriate more than the revenues can support, digging deeper and deeper into savings accounts. Political realities prevented this governor, and the previous one, from cutting spending as much as needed to avoid a downgrade.
Gov. Bill Walker, before leaving office, added hundreds of millions of dollars to the state budget before pronouncing it “balanced.” It was up to Gov. Michael Dunleavy to bring a dose of courage needed to make the cuts.
Fitch and other ratings agencies don’t much care if Alaska cuts its budget or raises taxes; it just wants to see the books balance.
House Bill 2001, the operating budget that included $156 million in budget restorations, reduced one third of the state’s deficit with a reduction of $650 million in total state spending. But it came at a political price that was born primarily by the governor, not by the bipartisan Legislature — he’s now the focus of a recall campaign led by Democrats.
On the bright side, Fitch said the State’s rating outlook is stable. In 2017, it said the outlook was unstable.
The AA+/Aa1 rating signifies that the issuer or carrier has strong financial backing and cash reserves, according to Investopedia. But it means it will cost the State more to borrow money for general obligation bond projects.
SAME RATING DOWNGRADE AS HONG KONG
Like Alaska, Hong Kong suffered the same rating fate, as it was downgraded by Fitch last week from AA+ to AA.
“Ongoing events have inflicted long-lasting damage to international perceptions of the quality and effectiveness of Hong Kong’s governance system and rule of law, and have called into question the stability and dynamism of its business environment. These features are integral to Fitch’s assessment of the territory’s creditworthiness, and while still strong in a global context, are at risk of being further eroded as a result of enduring social strife,” the agency said.