At the same time, Standard & Poor's affirmed its 'AA+' long-term and underlying ratings (SPUR) on the state's various-purpose and motor vehicle fuel tax (MVFT) GO bonds outstanding and its 'AA' rating on the certificates of participation (COPs), which are secured by state appropriations.
The state's full faith and credit secure both the various-purpose and MVFT GO bonds, although motor vehicle and special fuels excise taxes first secure the MVFT GO bonds. State appropriations secure the state's COPs. Series 2010A bond proceeds will primarily be used to fund various state building, transportation, public school, and water supply development projects. Series 2010B proceeds will be used to reimburse the state for transportation projects and series 2010T proceeds will be used to fund certain taxable projects.
"The ratings reflect our view of Washington's sustained period of historical employment and population growth in the past several years, although recent trends have weakened," said Standard & Poor's credit analyst Sussan Corson. The ratings also reflect what we see as the state's relatively well-educated workforce, with what we consider good income indicators; and historically good ending reserve balances, including a constitutional rainy-day account (RDA), which have helped mitigate a biennial budget gap stemming from further reduced revenue forecasts.
Also factored into the ratings are the state's somewhat concentrated, although gradually diversifying, economic and job bases in industries that we view as cyclical, such as real estate, aerospace, and high technology.
The stable outlook reflects what we view as Washington's strong financial management and our expectation that it will continue to make timely and proactive budget amendments as needed to maintain budgetary balance. The RDA, and the mechanisms by which it is funded, helped to mitigate Washington's slumping economic and revenue performance this year, which will remain a challenge for the state in the upcoming biennium. Nevertheless, in Standard & Poor's view, if future economic recovery is slower than projected, a significant dependence on nonrecurring resources to balance the biennial budget will make it more difficult for the state to return to structural budgetary balance, which could pressure the rating.
RELATED RESEARCH
USPF Criteria: "GO Debt," Oct. 12, 2006
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Sussan Corson, New York (1) 212-438-2014
Gabriel Petek, CFA, San Francisco (1) 415-371-5042