Moody's Investors Service upgraded New York's general obligation and personal income tax bond ratings to Aa1 from Aa2 Monday, citing improved governance and finances.
It also upgraded the state's appropriation, intercept and moral obligation bonds. The state has a total of about $62 billion in debt outstanding.
Moody's has a stable outlook on the ratings.
New York's government has recently reversed its history of gridlock, said Moody's vice president Marcia Van Wagner. The state has adopted budgets on time, implemented spending controls and moved towards structurally balanced budgets.
New York finished fiscal 2014 on March 31 with a General Fund balance of $2.2 billion. This was up from $1.8 billion the previous year. The new balance is 4.2% of receipts and net transfers.
In the same period of time, the state operating fund balance increased to $4.8 billion from $4.3 billion. The state operating fund includes the General Fund, state-financed revenue funds and a debt service fund.
While Generally Accepted Accounting Principles-based financial results are not yet available for fiscal 2014, Van Wagner expects them to be positive for the first time in six years.
Under Gov. Andrew Cuomo the operating fund spending has been contained at a 2% limit, unlike the preceding years.
Van Wagner also said the state's pension position was a positive. Its adjusted net pension liability was 16.5% of all governmental fund revenue, well below the 50 state median of 63.9%.
The state's economy had been doing better than average up to 2012, Van Wagner said. It has since been more middling and the unemployment rate in April was 6.7% compared to a national unemployment rate of 6.3%.
The state's per capita personal income is very strong at 121% of the United States level.
For negatives, Van Wegner said that the state's bonded debt level is the fifth highest in the nation on a per capita basis at $3,200.
The state's economy is disproportionately exposed to the finance industry.
"The Moody's announcement is a clear signal to investors that New York is on the right financial plan," New York State Comptroller Thomas DiNapoli said. "The rating upgrade is a positive reflection on the steps the governor and the legislature have taken in recent years to strengthen the state's cash position, better align ongoing levels of spending and revenues, and reduce out-year budget gaps, which are actions that I have consistently highlighted as essential reforms."
"You can make a case for what [Moody's] did and you can also make a case against what they did," said E.J. McMahon, senior fellow at the Empire State Center for New York.
Economic and job growth has lagged in the last two years, he said.
Since 2011 New York has deferred $2.5 billion in pension payments and plans to defer another $740 million this fiscal year, McMahon said. Its latest financial plan update indicates the state intends to halt this practice after the current fiscal year.
Alan Schankel, managing director at Janney Capital Markets, was more positive about the Moody's action. He said he thought it was warranted. The state's budget process has gone well in recent years. Moody's is placing emphasis on pension funding and the state's pension is well-funded. The state has had a fairly strong economic recovery.
Standard & Poor's and Fitch Ratings rate the state's GO debt at AA with a positive outlook.
They may or may not follow Moody's upgrade, Schankel said.
On Monday Moody's upgraded the state's sales tax revenue, Local Government Assistance Corp., New York City Sales Tax Asset Receivable Corp., and New York State Thruway Highway and Bridge Trust Fund bonds to Aa1 from Aa2. It upgraded other appropriation-backed debt, state intercept programs, and state moral obligation bonds by one notch to ratings A1, Aa3, or Aa2.
