BRADENTON, Fla. - Moody's Investors Service yesterday placed a negative outlook on Florida's general obligation debt rating and certificates of participation, citing a trend of declining revenues hitting most states.
The action affects $13 billion of outstanding debt backed by the state's full faith and credit and $290 million of COPs, rated Aa1 and Aa2, respectively. Moody's affirmed those ratings.
Florida is experiencing significant revenue weakness stemming from the state's economic slowdown and continuing deterioration in its housing market, which may be exacerbated by the downturn in the national economy, said Moody's analyst Mark Tenenhaus.
The change in outlook follows results of last week's Revenue Estimating Conference, in which forecasters revised revenue estimates for the current fiscal year downward by $1 billion. It was the third downward revision for a cumulative decline of $3.15 billion.
The change in outlook is not surprising, according to Ben Watkins, director of the state's Division of Bond Finance, given the declines in revenues. "But still it's disappointing," he added.
Although the Legislature has made budget cuts twice this fiscal year, they have yet to respond to last week's newest shortfall.
"But I'm hopeful and optimistic that they will manage the state budget in the prudent way they have historically in making timely budget adjustments to constructively deal with lower projected revenues," Watkins said.
Tenenhaus credited state officials for taking action as revenues have declined. He also noted that Florida maintains a $1.35 billion budget stabilization fund and has other financial resources available, which are positive attributes.
Downturns in the housing market and national economy are extenuating factors that led to the change in outlook, Tenenhaus said.
Moody's action came in concert with a review of the state's planned issuance of $200 million of public education capital outlay bonds backed by the state's full faith and credit. Moody's rated the bonds Aa1. No date has been set for the transaction to sell, and other ratings were not available yesterday.
Florida's general obligation debt is rated AAA by Standard & Poor's and AA-plus by Fitch Ratings.
