Oklahoma Leaders Push Agencies for Upgrades

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DALLAS — Oklahoma officials seeking an upgrade in the state’s credit touted its strong economy and sound fiscal policies in talks last week with rating agencies.

Gov. Mary Fallin, Treasurer Ken Miller, Finance Secretary Preston Doerflinger and state bond advisor Jim Joseph met Jan. 19 and 20 in New York with analysts from Moody’s Investors Service, Fitch Ratings and Standard & Poor’s.

Fallin said the visit gave her the opportunity to talk about Oklahoma’s economic recovery and job growth.

“The message the rating agencies heard from us was that unlike the federal government, Oklahoma has a balanced budget and is making government smaller, smarter and more efficient,” Fallin said. “We made the case that these factors make Oklahoma a great place to invest.”

Oklahoma has an issuer rating of AA-plus from Standard & Poor’s and Fitch, and Aa2 from Moody’s.

Oklahoma has a long-term goal of receiving a triple-A credit rating to reduce its borrowing costs, according to Miller, but any upgrade would give the state its highest-ever credit rating.

The state is well-positioned to receive a change in outlook to positive from stable, Miller said, and perhaps a rating boost from Moody’s.

“The end result could ensure more taxpayer dollars are spent on investments and less on interest,” Miller said.

“The shining state on the prairie has a very positive story to tell,” he said. “We’ve managed through the recession better than most states by maintaining core services without a tax increase. We are replenishing our rainy-day fund, addressing our pension problems, and have responsible levels of debt.”

Total state tax-supported debt of $2.17 billion includes $223 million of general obligation bonds and $1.3 billion of lease revenue bonds issued by the Oklahoma Capitol Improvement Authority.

Joseph told rating analysts that Oklahoma’s per-capita debt is just over 1% of 2010 per-capita personal income and 4% of general revenue appropriations. He said the state is on track to have 93.4% of outstanding tax-supported bond debt repaid within 20 years.

At the current ratings, Miller said, Oklahoma’s credit is well-received in the municipal bond market.

The latest state bond sale, a $70 million issue by the OCIA for highway projects, resulted in true interest costs of 2.2% over the 14-year term.

Analysts at all three major credit-rating agencies questioned the $5.5 billion of unfunded liabilities in the state pension funds, according to Miller, along with the constitutional restraint on revenue increases.

Oklahoma voters approved a constitutional amendment in 1990 that requires revenue-raising measures be approved by a statewide vote or by three-fourths of the Legislature.

Miller called the rule fiscally prudent, but said rating agencies consider it a limitation on the state’s ability to raise revenue if needed.

“The restriction has helped constrain state government spending and has forced cost-cutting solutions and efficiencies that may not have come about had revenue raising been easy,” he said.

State revenues in the first six months of fiscal 2012 totaled $2.7 billion, almost $240 million more than expected. Unemployment in Oklahoma held steady at 6.1% in December.

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