PROVIDENCE – Moody’s Investors Service slashed Rhode Island’s outlook to negative from stable, The Bond Buyer said Tuesday.
The downward revision is based on the potential impact of escalating pension costs on the state’s ability to increase its liquidity margins, diminish its reliance on one-time measures to balance its budget and reduce its debt burden, Moody’s said.
“The state is likely to continue to face significant budgetary pressures and fail to achieve the fiscal breathing room needed to sustain a financial position commensurate with other Aa2-rated states,” it said.
The service affirmed the Aa2 rating on the state’s general obligation bonds which looks at: Rhode Island’s institutionalized governance practices; maintenance of modest but positive general fund balances, including a fully funded budget reserve fund; narrow liquidity; and an economy that has lagged behind the nation’s.
“Even prior to the recession, Rhode Island faced persistent revenue under-performance and spending challenges. These were exacerbated by the downturn and by the state’s practice of balancing its budgets with one-time solutions and increasing its short-term borrowings for cash flow purposes. The state appears poised to reverse these practices in its fiscal 2012 budget, which is likely to be adopted very close to the July 1 opening of its new fiscal year,” Moody’s said.
On the state’s appropriation debt and certificates of participation, Moody’s affirmed the Aa3 rating. Rhode Island has about $1.1 billion in outstanding general obligation debt and $640 million in outstanding appropriation debt and certificates of participation, it said.
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Whew! I’m so glad we getting the advice on our bond ratings from a company that rated subprime mortgage backed securities as high investment grade instruments and has a direct link to the financial collapse of 2008.. Yup. I’m sure we all know where to file this article.
Steve’s comment knocks Moody’s rating track record. That’s not what matters here. What does is that the financial markets will treat us less favorably based on Moody’s downgrade and corporations will be less likely to relocate here or expand. And his implication that because Moody’s has made rating mistakes we shouldn’t be concerned about RI’s fiscal shape is ignoring the dire mess we are in.
Nice try, C William. That is not what I said nor what I meant. Of course we should be concerned. I mean, I guarantee I have much more stake in the economic game in this state than you do. It’s easy being a lower level middle class keyboard commando with a lot of baseless opinions. I love how you dismiss a total financial meltdown as a simple “mistake” on Moody’s part. We all paid quite dearly for their “mistake,” didn’t we? Sorry, but they did what they did and lost all credibiltiy for it in my eyes. In fact, they are the poster boys for lies and deceit. Again, I’ll dismiss anything they have to say. Calling them out for being a low quality outfit and dismissing their work is the right thing to do.