SAN FRANCISCO — Moody’s Investors Service changed the rating outlook on more than $18 billion of Washington debt to negative from stable Monday because of falling revenues.
The rating agency revised its outlook and affirmed its Aa1 general obligation bond rating for the state and did the same for its Aa2 rating on Washington’s certificates of participation. Moody’s said the state has $17.5 billion of GO bonds and $903 million of COPs outstanding.
“The outlook revision to negative from stable reflects the magnitude of the revenue falloff that continues to challenge the state as it struggles to recover from the recession,” Moody’s analyst Nicole Johnson said in a report released Monday.
Washington lawmakers have been dealing with a $1.4 billion budget gap for the current two-year budget, which is about 5% of spending, according to Moody’s. The state faced a $4.9 billion hold in its budget going into the current biennium that began in July.
Moody’s noted that many states are reporting little or no budget gaps for the current fiscal year.
Washington also faces weak reserves and high fixed costs relative to available revenue for the state’s above-average debt load, the rating agency said.
On Friday, Fitch Ratings shifted its outlook on Washington to negative from stable, while also affirming the state’s AA-plus GO rating. Standard & Poor’s on Friday affirmed its AA-plus rating and stable outlook.
“The outlook change is not indicative of the state’s fiscal management,” Washington Treasurer James McIntire said in a statement Friday. “As recognized by the rating agencies, the Legislature has historically done an excellent job in making budgetary adjustments to meet revenue shortfalls. We fully expect them to do the same now.”
Lawmakers are working to tackle a $1 billion budget gap and buffer reserves in the current two-year budget during a two-month session that started earlier this month. The Legislature knocked a about a third out of the shortfall during an emergency session at the end of last year called by Washington Gov. Christine Gregoire.
Gregoire has proposed a temporary half-cent sales tax increase to help raise revenue. The higher sales tax would help fund education, social services and public safety programs that have been cut in recent budgets.
She has also proposed a $3.6 billion transportation package over the next decade funded by a $1.50 fee on every barrel of oil produced in the state.
Washington doesn’t have an income tax.
Analysts reviewed the state credit ahead of $1.5 billion of debt sales over the next month.
The bonds are to be sold through competitive bid, with $960 million in refunding bonds on Tuesday and the new-money bonds on Feb. 28.
The new-money sale will start on Feb. 28 and will include $346 million of various-purpose GO bonds and $188 million of GOs backed by the vehicle tax.