DALLAS – Texas became the first state to carry four triple-A ratings Wednesday as Kroll Bond Ratings Agency issued its inaugural report on the Lone Star State's general obligation rating.
Texas is the fifth state in the U.S. to add a Kroll rating, following Connecticut, Wisconsin, New York and New Jersey.
Texas Comptroller Glenn Hegar sought the Kroll rating for additional perspective on the state's debt and budgeting process.
"Kroll's analysis highlights our state's diverse economic base as well as our history of conservative budgeting practices and Texas' willingness to tackle difficult fiscal issues," Hegar said. "The report provides an opportunity to look at the state's strengths and challenges with a fresh perspective, allowing the state to continue to focus on long-term budgetary and financial stability."
In the inaugural report, KRBA analyst Kate Hackett noted Texas' ability to withstand a downturn in the oil and gas market, which has thwarted the state's sales tax revenue growth.
"While the oil and gas industry is still a significant part of the economy and fluctuations in market prices impact employment and business activity in the state, it is KBRA's view that the State's economy has diversified and expanded well beyond reliance on this sector," Hackett wrote.
"Recent declines in oil prices have slowed economic growth somewhat but employment continued to increase at a rate of 1.5% between May 2015 and May 2016," she wrote.
In the past 20 years, Texas' population grew 42% to 27.5 million. That compares to U.S. population growth of 19%, Hackett said.
From 1998 to May 2016, total state employment increased 32.5%, compared to 15% for the U.S. Gross state product grew 180% since 1997, compared to 140% for the nation, according to Hackett.
"The 2014 GSP level equates to $54,055 per capita, which puts the state in the top 20th percentile for the U.S.," Hackett said.
Despite a downturn in the energy market, Hegar has decided to forgo tax and revenue anticipation notes for the second year in a row. The Trans are used to smooth cash flows to school districts over the course of the fiscal year. But Texas is still so flush that it does not need the annual borrowing, Hegar said.
Texas is the largest of 14 states rated triple-A by Moody's Investors Service. Moody's raised the rating from Aa1 on April 16, 2010. S&P Global Ratings raised the state's issuer credit rating to AAA from AA-plus on Sept. 27, 2013.
