Montana's bond ratings improve
By CHARLES S. JOHNSON Missoulian State Bureau
HELENA – Another rating service has upgraded Montana’s bond ratings, meaning it will be cheaper for the state to borrow money.
Last week, Fitch upgraded the state’s $209 million in outstanding general obligation bonds to AA from the previous AA-. Fitch’s investment grading ratings run from BBB- at the low end to AAA at the top.
Fitch also gave the state an AA rating for $11.72 million of general obligation, long-range building program bonds being sold the second week of July.
In an interview, Gov. Brian Schweitzer said he was pleased with the improved bond ratings, which will save Montana money over time through lower borrowing costs. The state already pays millions of dollars in interest from borrowing, and the better ratings should reduce those interest expenses.
“That’s money we can invest in schools, health care and cut taxes with,” Schweitzer said.
The governor said Montana got improved ratings from two of the three ratings agencies for several reasons.
“It is because of our conservative fiscal management and because we have such a high ending fund balance and have resolved the crisis with our pension funds,” he said.
Schweitzer, a Democrat, said Fitch’s words of praise for Montana’s financial condition “are a far cry” from the criticism Republican legislators mounted over his administration’s recommended budget.
In general, Republicans didn’t want to increase government spending by as much as Schweitzer and Democrats did, and were highly critical of the level of the spending hikes. Republicans advocated returning far more of the projected surplus back to Montanans in the form of tax relief.
Fitch said it awarded Montana the better rating for several reasons.
“The upgrade is based on the state’s conservative financial practices along with strong revenue performance, as evidenced by the recent actions to address pension and education funding, two longstanding credit concerns,” Fitch said in a written release. “The rating also reflects the state’s growing economic diversity, low debt burden and high financial reserve levels, a necessity given the state’s history of revenue volatility.”
The state’s revenue volatility has resulted mostly from reliance on personal and corporate income taxes and revenue from energy extraction, Fitch said.
The rating agency said Montana’s economy is “performing well, marked by consistent job growth, low unemployment and increasing diversification.”
Fitch said the state expected to end its 2007 two-year budget period on June 30 with a $459 million general fund balance, which is 26 percent of fiscal-year spending. It said much of the balance is intended for one-time expenses over the next two years, including $180 million in capital construction projects, $120 million in tax refunds and $50 million put in the teachers’ retirement system.
Earlier this year, another ratings agency, Moody’s Investors Service, said it was upgrading Montana’s general obligation bond rating to Aa2 from Aa3. Its highest rating for investment grade bonds is Aaa.
The third major ratings agency, Standard and Poor’s, has taken no action yet to boost Montana’s bond ratings.
