DALLAS - Standard & Poor's raised its unenhanced ratings on Oklahoma's general obligation bonds to AA-plus from AA on Friday in recognition of the state's strong financial policies and its efforts to deal with unfunded liabilities in the state teacher retirement system.
Standard & Poor's also raised its rating on bonds issued by the Oklahoma Development Finance Authority and the Oklahoma Capital Improvement Authority supported by legislative appropriations, to AA from AA-minus.
The outlook on the ratings is stable.
The upgrade is the first for the state in some 47 years, said James Breeding, a credit analyst with Standard & Poor's office in Dallas.
"Oklahoma has been rated AA since 1961, so they are a very stable credit," Breeding said. "They've added to their reserves every year for four years, and they've addressed a large unfunded liability in the teacher's retirement system. Oklahoma has a very resilient economy."
Breeding said Standard & Poor's reviews state ratings on a continual basis.
"We look at them every time they issue debt," he said. "We look at almost every state several times a year."
Oklahoma's GO debt is rated Aa3 by Moody's Investors Service and AA by Fitch Ratings.
The upgrade is good news for Oklahoma, said state Treasurer Scott Meacham.
"Obviously it will mean lower interest rates that will save the state a great deal of money in debt service," he said. "It is also a message to the financial markets that Oklahoma is in good fiscal shape."
Meacham said he and Gov. Brad Henry met with all three ratings agencies in late 2007 during a trip to New York City.
"We met with them last fall and made a strong case for an upgrade," he said. "We told them that our oil and gas economy was strong, that we were dealing with the unfunded liabilities in the retirement system, and that we were putting the maximum amount of money into our reserve fund that was allowed under the state constitution."
Breeding said the 2008 Legislature increased the required contributions by teachers to the retirement system, and appropriated additional funds to local districts to pay for the increase.
"It's not an overnight solution, but it is a start," he said.
The state's economy has been on an upward path since 2004, Breeding said.
More than 35,000 new jobs have been created in Oklahoma over the past two years, he said, and the state's unemployment rate of 3.3% is below the national rate.
Oklahoma ended fiscal 2007 with a net general fund operating surplus of $235.1 million, bringing the total general fund balance to $4.2 billion, or 30% of expenditures. The unreserved general fund balance totaled $2.3 billion, or a 16% of expenditures, though all the funds are dedicated to certain state agencies and revolving funds.