CHICAGO — Fitch Ratings yesterday downgraded by one notch to AA Ohio’s $7 billion of general obligation debt due to long-term deterioration in the state’s economy and its impact on state financial operations.
The credit’s outlook was revised to stable from negative. The agency also lowered the state’s appropriation-backed bonds one notch to AA-minus. The downgrade came ahead of the state’s sale of $40 million of GO bonds for coal development projects, scheduled for next week.
Despite sound financial management, the state’s economy is suffering from widespread job losses both from a shift away from manufacturing over the last decade and now the recession. Ohio has lost 100,000 manufacturing over the last year. “The prominence of auto assembly plants and associated parts manufacturers is a particular concern” as the state has lost 25,000 auto-related manufacturing jobs over the last year, analysts wrote.
The downgrade comes as Ohio lawmakers continue to hash out differences on a new biennial budget. They face growing pressure to tap the state’s $1 billion budget reserve to address a $900 million deficit in the current budget. Gov. Ted Strickland’s proposed budget for the next biennium relied on use of a portion of those reserves.