CHICAGO — Moody's Investors Service Friday upgraded Michigan one notch to Aa1, saying the state is enjoying strong financial and economic growth and rebuilding its reserves.
The upgrade came days after Standard & Poor's boosted its outlook to positive from stable, also praising the state for its growing rainy day fund.
It's the latest good news for a state that for years was the poster child for declining manufacturing economies and as recently as last year was largely known for the bankruptcy of its largest city.
Michigan is widely considered to have entered into a recession in 2000, years before the recession of 2008 dragged its economy down further.
Moody's and Standard & Poor's downgraded Michigan from triple-A in 2003. Gov. Rick Snyder, now in his second term, has repeatedly said one of his goals is to regain the top ratings the state enjoyed before its downward spiral began.
Ratings actions since 2014 have largely been positive.
In 2014, Fitch Ratings upgraded the state to AA from AA-minus, and Moody's revised its outlook to positive from stable. S&P also revised its outlook to positive from stable, before revising it back down to stable in mid-2014, then bringing it back up to positive this week.
"We have worked relentlessly since taking office in 2011 to get our fiscal house in order, put in place a simple, fair and efficient tax system, reduce the state's long-term liabilities, and grow the state's economy and quality of life for all," Snyder said in a statement in response to the Moody's upgrade. "This reaffirms that works and why it's so important to continue moving forward on this path."
The positive ratings action come ahead of a State Building Authority set to price next week. The deal features $990 million of revenue bonds - not backed by a state pledge - and marks the building authority's largest deal to date. Moody's upgraded the bonds to Aa2 from Aa3, linked off the general obligation rating.
Moody's revised its outlook to stable from positive at the higher rating.
"The upgrade to Aa1 from Aa2 reflects improvement in the state's financial position, particularly growth in the state's rainy-day fund, bolstered by a strong tax revenue trend; a robust growth rate in the economy that has featured an improvement in the auto sector; and moderate debt and pension burdens," Moody's said in a press release. "The rating also recognizes our expectation that the state will continue to oversee local government distress with manageable direct state financial exposure."
S&P also warned that distressed local credits could pressure the state's bottom line.
Snyder on July 22 declared the state's largest county, Wayne County, home of Detroit, to be in a state of financial emergency.
The state in 2013 dipped into its rainy-day fund for a $200 million payment to help settle Detroit's bankruptcy.
"Costs associated with assisting local governments greater than levels currently anticipated," could lead to a downgrade, Moody's warned.
Fitch Ratings assigns its AA-minus to the building authority bonds; it has a stable outlook on Michigan.
Michigan has $1.9 billion of general obligation bonds and $3.1 billion of appropriation-backed debt.