CHICAGO — Nebraska won a coveted AAA rating last week from Standard & Poor’s. The upgrade reflects Nebraska’s history of a stable economy, conservative budgeting, strong reserves, and one of the lowest debt burdens in the nation, according to analysts.

The upgrade comes as the rating agency implements a new set of state-based criteria. Nebraska is now one of 12 states rated AAA by Standard & Poor’s.

“There are a lot of strengths there,” analyst Helen Samuelson said. “Their pension funding levels are under control, there is stability in the tax base, and overall the economy is stable. There were a lot of things that pointed to an upgrade.”

Nebraska enjoys the second-lowest unemployment rate nationally and is anchored by growth in its top cities of Omaha and Lincoln.

Like most states, it has suffered from revenue declines since 2008, but has remained largely immune to the highs and lows of the national recession and the housing market.

The state’s main revenue sources are sales and income taxes. “Those revenues have had some softness, but seem to be ticking upward again,” Samuelson said. “They’ve mainly been cutting their way through budget pressures, and officials have told us they’re trying to avoid dipping into their reserves.”

The state’s reserves totaled $715 million at the end of fiscal 2010, totaling 21% of expenditures.

Nebraska does not issue general obligation debt, though lawmakers are poised to approve a bill that would allow the state to divert a piece of the sales tax to back bonds that would finance highway projects.

The state maintains several pension funds, which together are 84% funded, Samuelson said. Its other post-employment benefits liability is virtually nil, as it does not pay for retiree health care.

The Legislature is in its final days of crafting a fiscal 2012-13 budget that is expected to total around $6 billion.

Moody’s Investors Service does not maintain an issue rating on Nebraska and assigns a Aa2 to its senior tax-backed debt. Fitch Ratings does not rate the state.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.