LOS ANGELES - Alaska has received another downgrade from Moody's Investors Service as state lawmakers still can't seem to agree on a path to fiscal stability.
Moody’s downgraded Alaska's general obligation debt to Aa3 from Aa2 late Thursday, maintaining its negative outlook on the rating.
The agency also downgraded the state's lease revenue bonds, to A1 from Aa3, and its moral obligation bonds, to A2 from A1.
In a separate action, Moody’s affirmed the Alaska Municipal Bond Bank's general obligation rating at A1. Alaska’s fiscal year 2016 disclosure documents show about $1.77 billion of total bonded debt, including $921 million of GO bonds.
“The downgrade reflects the state's ongoing structural budget imbalance, a small economy with concentration in energy production, large fixed costs, and heavy pension burden,” Moody’s said.
Moody’s rated Alaska Aaa as recently as 2015, when the state also had AAA ratings from S&P Global Ratings and Fitch Ratings.
Fitch now has Alaska at AA-plus with a negative outlook, and S&P assigns its AA-plus rating. S&P placed Alaska on CreditWatch with negative implications on June 20, warning that it will downgrade the state again if a long-term solution to the state's problems is not forthcoming.
But the state is running an almost $3 billion annual budget deficit and relying on its constitutional reserves to keep operating, and is burning through those reserves at a rate that will deplete them entirely within two years. Gov. Bill Walker has called the legislature into two special sessions to try to create a fiscal reform package, but disagreements over new revenue measures have prevented meaningful new legislation from passing.
The standoff nearly resulted in a government shutdown this month, but an eleventh-hour operating budget agreement that did not address the state’s bigger problems managed to at least keep the government up and running.
Moody’s said its rating recognizes that Alaska does have the means to solve its problems, and that its baseline assumption remains that the state will do so before draining its reserves.