Red States See Signs of Red Ink
January 29, 2015 6:11 PM
Republicans now control both the governor's office and legislature in six of the eight states in The Bond Buyers Southwest region. Only one of the eight, Colorado, has a Democratic governor. Republicans and Democrats split control of the legislature there and in New Mexico. Five of the Southwest states, Texas, Oklahoma, New Mexico, Colorado, and Utah benefitted from rising oil prices until August. Since then, plummeting prices have blurred outlooks. Despite varied economic outlooks, Republican governors across the region promote tax cuts and less regulation for business, along with support for gun rights. Image: Texas GOP.
Arizonas new Gov. Doug Ducey, center, greets Seattle Seahawks coach Pete Carroll, left, Jan. 26 in advance of the Super Bowl in Glendale. Facing a $1 billion deficit by the end of the next fiscal year, Ducey has pledged to balance the budget without increasing taxes. Duceys predecessor, Republican Jan Brewer, convinced the Republican-controlled legislature to expand Medicare, a move they are now trying to overturn in court. Arizona carries $2.5 billion of lease-revenue certificates for a lower-than-average per capita debt load of $902. Standard & Poors provides an issuer credit rating of AA-minus with a stable outlook. Moodys Investors Service has a positive outlook on its Aa3 rating.
Oklahoma Gov. Mary Fallin has warned state agencies to prepare for potential cutbacks after a $300 million gap developed in a $6 billion budget. Declines in the price of oil could enlarge the hole. Fallin said that tapping $1.7 billion in revolving funds could solve the problem. Republicans control both houses of the Legislature. Oklahoma has a relatively light $2.04 billion of tax-supported debt or 1.6% of gross state product, but the states $14 billion unfunded pension liability is considered large by Moodys Investors Service. Moodys rates the Sooner State Aa2 with a stable outlook. Fitch Ratings and Standard & Poors rate it AA-plus, with stable outlooks.
New Mexico Gov. Susana Martinez can expect to see $141 million in new revenue for the states $6 billion budget, according to a December forecast. Thats about half of the additional revenue that was expected as recently as last August. A $1 change in oil prices causes a $7.5 million change in revenue for the state, and the price of New Mexicos oil has fallen by more than 50% since August. New Mexico elected Republican Martinez to succeed Democrat Bill Richardson in 2010 and re-elected her in November. Republicans hold a four-seat majority in the state House, while Democrats control the state Senate. Standard & Poors changed the outlook to negative on New Mexicos AA-plus rating Nov. 26. Moodys still has a stable outlook on its Aaa rating. With $2.5 billion of tax-supported debt, the per capita load of $1,406 in the Land of Enchantment is 33% higher than the median for all states, Moodys says.
Kansas Gov. Sam Brownback has proposed spending cuts and increases in tobacco and alcohol taxes to help close a projected $650 million shortfall in the states $6.23 billion budget. Brownback, who promoted major tax reductions in his first term, vowed to continue our march toward zero income taxes in his second inauguration. Brownbacks Democratic opponent said the governors economic experiment has backfired, but voters retained the governor and the Republican-led state Legislature Nov. 4. Kansas is rated AA by Standard & Poors with a negative outlook after a one-notch downgrade Aug. 6. Moodys rates the Sunflower State Aa2 with a stable outlook. With about $3.17 billion of tax-supported debt, Kansass per capita debt load of $1,112 is above the median of $1,074, Moodys says.
Utah Gov. Gary Herbert, who easily won re-election to his second term in November, expects $638 million in extra revenue for the coming fiscal year. The total is made up of 2014 and 2015 revenue growth above projections and some funds that were not used in previous years. The only signs of trouble come from the Uinta Basin, where falling oil prices threaten to reduce excise taxes and shrink local economies. Herberts Republican Party maintains perennial control of the state Legislature. The triple-A Beehive States $3.44 billion of debt represents about 1.5% of personal income, Moodys says.
Republican Asa Hutchinson succeeded Democrat Mike Beebe as governor of Arkansas in 2015 as his party maintained control of the Legislature. Despite flat revenue projections, Hutchinsons $5.2 billion budget proposal calls for $102 million of tax cuts. Hutchinson's budget would also tap the state's surplus to aid Arkansas' Medicaid program, school facilities and expanded computer science classes in public schools. With $1.7 billion of tax-supported debt, Arkansas is rated AA by Standard & Poors and Aa1 by Moodys with stable outlooks. At 1.7% of its personal income, Arkansass debt is considered low compared to the U.S. median of 2.6%.
As the only Democratic governor in the eight-state Southwest region, Colorado Gov. John Hickenlooper dodged an upset by Republican Bob Beauprez in the Nov. 4 election. Hickenlooper, a former geologist who reinvented himself as a brewpub proprietor, must walk a fine line between the states traditional oil and mining business and environmental groups. The voter-approved legalization of marijuana throws another faction into the states political mix, as does an extremely restrictive Taxpayer Bill of Rights amendment. Republicans gained control of the State Senate in 2014, while Democrats kept the House. Still enjoying rising revenues, the Centennial State is watching warily as oil prices fall. Colorado, which does not issue general obligation debt, has issuer credit ratings of AA by Standard & Poors and Aa1 by Moodys with stable outlooks. The states tax-supported lease-revenue debt is about $2.72 billion.
Texas Gov. Greg Abbott won a promotion from his previous job as attorney general after one of the strongest economic years in the states history. His predecessor, Gov. Rick Perry, claimed much of the credit for the states rise during his record 14 years in office. However, the states tumbling oil prices have already brought layoffs and some predictions of recession. With Republicans firmly in control of the Legislature, Abbott is proposing a $4 billion boost in transportation funding with no increases in taxes. Abbott, who sued President Obama 31 times as attorney general, accuses Obama of overreach in seeking to expand medical insurance in the state. Rated triple-A, the Lone Star State has $17 billion of general obligation debt, but that comes to only $614 per capita, about 58% of the median level for all states.
