Moody's Investors Service said it has downgraded the state of Alaska's general obligation rating to Aa1 from Aaa and assigned a Aa1 rating to the state's general obligation bonds, Series 2016A.
The downgrade affects $744.2 million of outstanding GO debt. Concurrently, the agency has downgraded lease appropriation bonds and certificates of participation to Aa2 from Aa1 and the state's moral obligation debt to Aa3 from Aa2.
The downgrade to Aa1 reflects the heightened volatility in Alaska's revenues and the unprecedented structural imbalance caused by it, the agency said. The state's financial reserves are large, but recent budgets have been calibrated to oil prices above $100 per barrel, not prices forecasted to be less than half that though the next four years.
Even with significant spending reductions, recurring revenues cannot keep pace with recurring expenditures, and the state would deplete its main budgetary reserves by fiscal 2019, absent significant changes in its financial framework, Moody's said.
