State of Alaska’s bond credit rating outlook improves

Moody’s Investors Service has changed its outlook on the state of Alaska’s general obligation bond credit rating from negative to stable, citing the state’s low debt burden, expanding economy and conservative financial planning.

Favorable bond ratings help state and local governments borrow at lower interest rates, reducing the cost of new schools, roads, ports and other capital investments. Credit rating changes are usually preceded by an indicative outlook, making today’s announcement good news for Alaska issuers of public debt and holders of Alaska bonds, a Nov. 19 press release from Alaska Gov. Frank H. Murkowski said.

“I am pleased with this increased confidence in the future of our great state, and I share that confidence,” Murkowski said. “I think it is clear that our outlook has improved significantly since 2002.”

In removing the negative outlook it placed on the state in 2002, Moody’s cited the state’s low debt burden, the expanding but still narrow economic base, sizeable reserve fund balances, and conservative financial planning efforts to accommodate the eventual limitation of oil revenues.

Moody’s also acknowledged efforts to bring North Slope natural gas to market.

In October the Alaska Department of Revenue, along with the state’s financial advisors, briefed Moody’s on progress made in Alaska and in the U.S. Congress aimed at construction of a pipeline to bring Alaska’s stranded North Slope natural gas to market.

Moody’s tempered its improved outlook for the state by cautioning that, “Our rating of Aa2 with a stable outlook is predicated on the assumption that the state will ultimately make the hard decisions necessary to address its structural budget problems.”