Moody's Investors Service Monday revised its outlook on Rhode Island to stable from negative and affirmed its Aa2 general obligation bond rating.
The move, which affects $2.2 billion in net tax-supported debt outstanding, comes ahead of the state's mid-October sale of about $208 million of consolidated capital development bonds. About $162 million of that amount is a refunding.
Rhode Island, with the nation's highest unemployment rate at 7.7% as of August, according to federal Bureau of Labor statistics, has been grappling with a controversial state employee pension overhaul, as well as the 38 Studios moral obligation bond financing fiasco.
"The change in outlook to stable from negative reflects the state's success in shoring up its finances through the maintenance of adequate available reserves and improved liquidity," said Moody's, which also cited the reduced risk of pension overhaul reversal, the lessening of negative demographic and economic trends, and less risk of economic intrusion from Massachusetts gaming.
Moody's also affirmed the ratings on roughly $1.7 billion of notched lease appropriation, certificates of participation, and moral obligation bonds, as well as Rhode Island Health and Educational Building Corp. intercept programs.
Rhode Island will use the new-money component for various capital purposes.
"Rhode Island's Aa2 rating incorporates the state's strong financial management practices, including multi-year financial planning, consensus revenue forecasting and consistent maintenance of reserves resulting in modestly positive general fund balances; and its narrow but improving liquidity," Moody's said in a report.
Fitch Ratings and Standard & Poor's rate Rhode Island's GO debt AA.
"I am pleased that Moody's is acknowledging our strong fiscal management and my leadership to ensure that we are moving in the right direction through investments in education, infrastructure and workforce development," Gov. Lincoln Chafee said in a statement.
Chafee said the state unemployment rate was at 11.4% when he took office, and has dropped 1.9 percentage points since August 2013. He added that the year-over-year decline in unemployment was best among the six New England states.
The 38 Studios controversy has generated national headlines. Rhode Island taxpayers are on the hook for roughly $75 million in moral obligation debt the Rhode Island Economic Development Corp. issued and backed to finance 38 Studios, the video-game company owned by ESPN commentator and former Boston Red Sox pitcher Curt Schilling.
The company filed for Chapter 7 bankruptcy two years ago.
Legislative debates over whether or not to honor the obligation raised questions from ratings agencies about the state's willingness to pay. So far state lawmakers have voted to make payments on the debt.
