PHOENIX - The State of Wyoming's outlook was changed to negative from stable by Standard & Poor's as the highly-rated state struggles with budgetary pressure.
The rating agency announced the outlook revision while affirming the state's implied AAA GO rating Thursday. Wyoming is among a number of energy rich states struggling with falling revenues due to depressed markets for oil and natural gas, as well as concerns about government-mandated clean air policies that could hurt the coal market.
"The negative outlook reflects our opinion that currently very high Wyoming operating reserve balances could eventually be pressured by the effect of lower energy prices on mining related state revenue," said Standard & Poor's credit analyst David Hitchcock.
The state boasts considerable reserves that S&P calculated amount to 68% of projected biennium spending, a cushion that the agency believes should allow Wyoming to eliminate a "relatively modest" operating deficit.
"With reserves of this magnitude, we believe the state should have adequate time and resources to make future year adjustments in order to maintain strong reserves, important in light of the state's volatile mining-derived revenue base and two-year budgeting process," the S&P report said. "Gov. Matt Mead has the power to make midbiennium cuts, and the state is more dependent on revenue derived from coal production than oil extraction. However, we believe Wyoming's forecast of future energy prices might prove optimistic and the structural deficit could widen."
If the state draws its reserves down significantly rather than making adjustments, it would likely have its ICR downgraded within two years, S&P said. If it manages to correct the imbalance, it would probably be restored to a stable outlook. Mead has already suggested to the legislature that significant cuts need to happen.
