Moody’s Investors Service last week affirmed Florida’s Aa1 implied general obligation bond rating, and said the state is unlikely to win a third, gilt-edged rating in the near future.
The state is rated AAA by Fitch Ratings and Standard & Poor’s.
Moody’s said its Aa1 rating considers Florida’s history of strong fiscal management over the course of economic cycles, its financial flexibility from sizeable reserve levels built up prior to the recession, limited revenue diversity due to the reliance on sales tax receipts, and a diverse economy with positive long-term growth prospects.
The rating also takes into account demographics that result in education and health care pressures, and state-sponsored hurricane insurance programs that could significantly increase assessments on property insurance policyholders in the event of a major storm.
“Absent the state’s ability to mitigate the economic and fiscal impact of hurricane risk, Florida’s rating is not likely to rise beyond the Aa1 level in the near future,” according to Moody’s analyst Nicole Johnson.
The state’s net tax-supported debt, totaling about $22 billion, is paid from specified taxes and is additionally secured by the state’s full faith and credit pledge.
Specified taxes have always been sufficient to pay debt service, and the state has never had to draw upon the general obligation pledge, Johnson said.
Moody’s said Florida’s rating outlook is stable, and affirmed other ratings.
They, including the Aa2 rating on $354 million of outstanding facilities pool lease rental bonds, the Aa2 on $632.8 million of certificates of participation issued through the Florida State Department of Management, as well as the Aa3 rating on COPs issued for the Correctional Privatization Commission and the Department of Children and Families.
The stable outlook incorporates Florida’s sound fiscal management through a period of severe economic strain, underscored by the state’s willingness to raise revenues and cut spending to address revenue declines, and strong reserve levels, Moody’s said.