Michigan is expected to successfully navigate through future budget deficits due to its fairly conservative revenue estimates and continued strong budget management, according to a report released last week by Standard & Poor’s.
“While significant uncertainty remains regarding the impact of the ARRA [American Recovery and Reinvestment Act] and the extent of further deterioration of the Big Three automakers, we expect that should any additional negative economic events transpire, the revenue consequences would be spread over a period of several years,” wrote analyst Jane Hudson Ridley.
“We believe this would allow the state room to make necessary adjustments in keeping with actions taken in years past. Actions to unduly delay difficult budget decisions, however, would contrast with past discipline and we believe would be cause for concern,” she added.
The state’s AA-minus general obligation rating is supported by an economic base that is diversifying, but also weathering a sustained downturn resulting partly from the relative importance of domestic automakers. The credit benefits from good budget management, a temporary but timely and significant infusion of $7 billion from the federal stimulus package, and a low debt and pension burden.