Raimondo: Rhode Island Deserves an Upgrade

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PROVIDENCE, R.I. — Gov. Gina Raimondo and other state officials will push for a bond rating upgrade when they meet with rating agencies in two weeks.

"I'd love to see Rhode Island upgraded and I think it is warranted," Raimondo said in an interview at the state capitol. "I think we're making progress. Our economy is up and our revenues are back."

Raimondo, a first year governor and the state's former general treasurer, cited the settlement of a lawsuit by unions challenging Rhode Island's landmark 2011 pension overhaul law, a budget that included $70 million in Medicaid savings, continued payment of moral-obligation debt related to the 38 Studios bond financing fiasco and an economic development-themed legislative session.

She confirmed last week that Rhode Island ended fiscal 2015 with a $166.4 million general fund surplus. The state spent $21.6 million less than budgeted, according to figures her office released. Revenues were up $23.9 million more than estimated.

"We've had a number of wins since January," current General Treasurer Seth Magaziner said in a separate interview. "We have a compelling story to tell."

The governor still warned that the state faces a large deficit for fiscal 2017.

"We're off to a good start, but there's much work to be done," Raimondo added.

Fitch Ratings and Standard & Poor's rate Rhode Island's general obligation bonds AA. Moody's Investors Service rates them Aa2. All three give stable outlooks.

Moody's last fall revised its outlook to stable from negative.

"I don't expect an upgrade or an improved rating outlook but I think their upside is better, yes," said Alan Schankel, a managing director at Janney Capital Markets. "I think they've got lots of issues but Rhode Island has a history of dealing with them reasonably aggressively, things like pension reform and prioritizing debt service."

In 2011, just as 19,000-population Central Falls was about to file for bankruptcy protection, Rhode Island passed a law giving bondholders priority in any Chapter 9 proceeding.

Rhode Island's last rating changes were in April 2010, when Moody's moved its rating from Aa3 to Aa2 and Fitch Ratings nudged it to AA from AA-minus, in both cases because of large-scale recalibrations of the agencies' rating scales.

"Their economic profile, obviously they've had struggles, while they've made some strides regarding pension liability. Financial management is a strength for them," said Fitch director Eric Kim, speaking generally.

"We rate them AA so it's slightly below most states, which we rate AA-plus or AAA on average. Fitch maintains a stable outlook on the state, so we feel comfortable where we are with the rating."

Raimondo's jobs plan focuses on advanced manufacturing, workforce development, tech startups, infrastructure, tourism, and small businesses. It includes the establishment of an infrastructure bank and school building authority, and establishes a fund to trigger job-creating opportunities on Providence land vacated through the relocation of Interstate 195.

Raimondo and Magaziner rebranded the triple-A rated Rhode Island Clean Water Finance Agency as the Rhode Island Infrastructure Bank, which will be the central hub for existing and new green infrastructure financing initiatives.

"Rhode Island has taken a number of measures that are pro-business," said state Sen. James Sheehan, D-North Kingstown. "Also, with great effectiveness and difficulty, we've reined under control the costs of the state pension system."

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