PHOENIX – Alaska lost its last remaining triple-A rating Tuesday, when Fitch Ratings downgraded the state to AA-plus.
The downgrade to AA-plus affects the state's issuer default rating and $753.8 million of GO bonds.
The rating agency placed the state on a negative outlook, citing its multi-billion dollar operating deficit and lackluster reform efforts. Before the downgrade, Fitch had Alaska on negative watch.
The state was unanimously triple-A rated until January, but has suffered a sharp decline in revenue due to rock-bottom oil prices and has now been downgraded by all three major rating agencies this year.
Fitch also cut $244 million in outstanding lease obligation bonds to AA from AA-plus.
Fitch announced the downgrades ahead of a $150 million GO sale scheduled for the week of June 22.
"The downgrade of the state's IDR to AA-plus from AAA reflects the substantial operating deficits recorded by the state in recent fiscal years and the modest reform efforts taken to date to realign its stressed, petroleum-based revenue structure with expenditure demands," Fitch said. "The AA-plus rating reflects the still sizable level of reserves at the state's disposal; reserves currently approximate 2.5x annual unrestricted general fund (UGF) expense. This provides the state with a substantial financial cushion while it seeks fiscal reform. The negative outlook reflects the state's need to reach and maintain budgetary balance given the sizable economic concentration in natural resource development, subdued growth prospects for revenue derived from this sector, and expected continued draws on reserves over the medium term."
Earlier this month Alaska's legislature passed a budget with a $3.2 billion draw on the state's Constitutional Budget Reserve after rejecting fiscal reforms urged by Gov. Bill Walker. The governor has yet to sign the budget.
Fitch also dropped Alaska Municipal Bond Bank Authority ratings one notch, leaving ratings at AA for debt under its 2005 bond resolution and AA-minus for its 2010 and 2016 bond resolutions.
