CHICAGO –Minnesota was removed from S&P Global Ratings’ CreditWatch Friday after a threat posed to repayment of some appropriation-backed debt was resolved.

S&P affirmed the state’s AA-plus rating and ratings on appropriation debt, moral obligation-backed debt, and school program guaranteed debt.

S&P took Minnesota off watch after Gov. Mark Dayton and GOP leaders agreed to remove the Senate's lease payment that goes to repay a small piece of state appropriation bonds from a budget dispute.

It had placed the ratings on watch June 15 due a dispute between Gov. Mark Dayton and the legislature’s GOP majority that had entangled repayment of $80.1 million of certificate of participation.

Dayton signed the two-year budget but vetoed the legislature’s spending appropriation in an effort to persuade the leaders to return to the bargaining table on tax cuts included in the budget. The move raised concerns over whether the lease payment needed for debt service on the Senate’s office building debt would be made.

Senate leaders had said they would funds on hand to cover payroll and other expenses before making the lease payment due in November and they filed a lawsuit against Dayton alleging his action had violated the state constitution.

Dayton -- a member of the state’s Democratic-Farmer-Labor Party -- and GOP lawmakers agreed to action that effectively removed the lease payment obligation from the budget dispute. Last week, the Ramsey County Court issued an order based on an agreement between Dayton and the legislature that continued funding for the House and Senate until Oct. 1, 2017, unless the legal dispute is resolved earlier. Debt service is due in December and June.

“In our view, the court order gives the state time to work out its political differences and solve its budgetary issues before the June 1 debt service payment; however, we will continue to monitor the process,” S&P wrote.

Fitch Ratings rates the state AAA and Moody’s Investors Service has the state at Aa1. Neither raised concerns over the appropriation issue saying the state had time to resolve any questions with the next payment not due until late this year.

Dayton signed the $46 billion two-year budget package to avert a government shutdown but issued a line-item veto of the legislature’s $82 million appropriation in an effort to force the GOP back to the negotiating table over the size and nature of $650 million in tax relief.

The state had the option to fund COPs debt service from either the department of administration's budget or the senate's budget, but as a matter of practice has done the appropriation through the senate budget, Fitch said.

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