Standard and Poor’s rating agency made it unanimous with the announcement today that it is lowering the state’s bond credit rating from AAA to AA+.
News that Standard and Poor’s has joined Fitch and Moody’s in the downgrade apparently didn’t come as a surprise to state officials.
“The downgrade is a direct result of the recently passed state budget,’’ Jim Schowalter, commissioner of Management and Budget, said in a statement. “The budget was substantially balanced using one-time measures and does not lead to a long-term financial solution. The rating agency also cited diminished reserves, further payment delays and the reliance on tobacco bonds for their decision.”
Gov. Mark Dayton had no problem placing blame.
“The downgrading of Minnesota’s credit rating is very disappointing but not surprising given the fiscal irresponsibility of the Legislature’s Republican majority,” Dayton said in a statement. “Standard and Poor’s specifically cited the use of one-time measures, which would not have been necessary had my proposed budget been adopted.”
Of course, Republicans will soon have a counter to Dayton’s assessment. They will point out that their cuts-only budget, which Dayton vetoed, would not have required the borrowing and shifts the two sides ultimately agreed on to end a state government shutdown.
The downgrade will be in play when the state sells bonds next week. The lower ratings will mean that the state will have to pay a slightly higher interest rate to borrow money on bonding projects.
Additionally, there will be a ripple affect across the public sector, experts say. Schools and cities also will have to pay a slightly higher rate to borrow money on bonds because typically the rates of those entities are tied to the state rate.
The good news: Minnesota has been in this soup before.
The bad news, according to Management and Budget: It took 15 years to get the highest ratings back.