Standard & Poor's Ratings Services said it lowered its rating to AA-plus from AAA on Alaska's general obligation debt, and its ratings to AA from AA-plus on the state's appropriation-backed debt.
It also lowered its rating to A-plus from AA on some bonds that were issued by the Alaska Energy Authority and are backed by a moral obligation pledge from the state. The outlook on all debt ratings is negative.
"The rating actions reflect our view of the state's credit quality as oil prices have continued to slide, falling below forecasts from earlier this year, causing an already large structural gulf between unrestricted general fund revenues and expenditures to widen further," said Standard & Poor's credit analyst Gabriel Petek.
The negative outlook continues to reflect the opinion that if lawmakers do not enact significant fiscal reforms to reduce the state's fiscal imbalance during its 2016 legislative session, Alaska's downward rating transition will likely persist.
Furthermore, it's possible that the downward rating migration could accelerate if lawmakers continue to fail to act as the state's budget reserves (not including the permanent fund) approach depletion.
On the other hand, the state's large reservoir of financial assets provides it with options that the rating agency believes have the potential to stabilize its credit quality.
S&P also lowered its rating to AA from AA-plus on Alaska Municipal Bond Bank's (AMBB). In addition, Standard & Poor's assigned its AA long-term rating, with a negative outlook, to AMBB's $38.5 million of GO bonds, 2016 series one.
The outlook on all the AMBB's debt is negative. The bond bank is a public corporation of, and benefits from certain credit support by, the state of Alaska.
