New York Gov. Andrew Cuomo pointed to a positive report from Moody’s Investors Service as a “strong affirmation” of improvement in the state’s finances.
The rating company on Thursday retained its Aa2 rating on the state’s general obligation debt and changed its outlook on New York to positive from stable. The outlook affects $62 billion in net tax-supported debt.
“Today’s action by Moody’s Investor’s Service to revise our state’s outlook from stable to positive is another strong affirmation of the progress we have made to put New York’s fiscal house in order,” Cuomo said.“After years of late budgets and legislative gridlock, we have been able to show that New York State is working again and confidence in government is being restored,” he continued. “Since taking office, my administration has delivered three-on-time and balanced budgets, controlled government spending, and cut taxes for the middle class to their lowest levels in 60 years. New York has gained over 300,000 private sector jobs with more being added every day and this momentum is leading us to fiscal stability and economic prosperity.”
New York State comptroller Thomas DiNapoli was not quite so positive: Though the Moody’s announcement is “clearly good news,” he said, “the state continues to face fiscal issues including continued use of budgetary actions that are temporary in nature. The challenge now is to build on the steps already taken, to align recurring revenues and expenses, and establish a truly strong financial position in the long term.”
Moody’s vice presidents Marcia Van Wagner and Emily Raimes said the positive outlook “reflects improvements in the state’s economy governance, financial position and fiscal outlook that, if continued, would allow the state to improve its reserves and draw closer to structural balance.”
The analysts wrote that New York has several strengths. The state has a broad-based, mature, and wealthy state economy that has shown an above average resilience during the recovery, they wrote. The state has a track record of closing budget gaps and, more recently, doing so with more structurally balanced solutions. Rainy day reserves have remained stable for 10 consecutive years.
The state’s pension system is well funded compared with other states and its unfunded liability is modest, they wrote. The state’s fixed costs relative to its total revenues are at the 50 state median.
Finally, the state has recently reversed its history of political gridlock, reflected in timely budgets, implementation of spending controls and a move toward structurally balanced budgets.
For challenges, the analysts note that the state’s above-average state tax-supported debt burden reflects a past record of deficit-related bonding. The state also has relatively low fund balances and revenue volatility from a dependence on taxes on the financial services sector.
Standard & Poor’s and Fitch Ratings rates New York’s GO debt AA. Both have positive outlooks on their rating.