June 20, 2018

Vermont maintains top-notch bond ratings

By Erin Mansfield

For VT Digger

International credit rating agencies say the state of Vermont has a positive financial outlook and have once again given the state’s general obligation bonds some of the highest ratings available. Moody’s Investor Service and Fitch Ratings have reaffirmed the state’s Aaa and AAA ratings, respectively, which are the highest score available at those agencies, on the state’s bonds. Standard and Poor’s reaffirmed the state its AA+ rating, the second-highest available. The ratings mean that Vermont has the highest bond ratings of any state in the Northeast, according to Beth Pearce, the state treasurer. Vermont has had the Aaa with Moody’s since 2007, she said, and the AAA with Fitch since 2010.

“I think that the fact that our ratings are what they are and that we’ve maintained our ratings in all three rating agencies is something that’s a testament to the type of government and the type of proactive management that we have in this state,” Pearce said. The ratings are on the state’s general obligation bonds, which the state uses to borrow money for things like roads and new construction, but does not apply to the housing bond the state intends to issue this year, according to Adam Greshin, the commissioner of the Department of Finance and Management.

Greshin encouraged lawmakers and people in state government to read the reports each agency wrote accompanying the rating. “In many ways they’re our report card and they tell us what someone outside looking in sees, and the people outside in these reports are knowledgeable in how they conduct their business,” he said. Moody’s praised Vermont’s “strong fiscal management, a track record of running surpluses most years even when revenues do badly, modest debt, and a small but productive economy,” and Standard and Poor’s said Vermont has a “strong budgetary framework.” Fitch praised Vermont’s “conservative financial management, including prompt action to address projected budget gaps as they emerge, and maintenance of sound reserves” while also acknowledging economic growth that is “steady but below national rates.” All three rating agencies wrote in their explanations of the ratings that the state has above-average pension liabilities — money that needs to be paid or will need to be paid to retired teachers and retired state workers — but only Standard and Poor’s said the liabilities were enough to keep Vermont from getting the highest credit rating possible. “The state’s slower-than-average economic growth will continue to pressure the budget during our twoyear outlook horizon,” Standard and Poor’s wrote. “In addition, pension … liabilities remain high relative to those of state peers.” Reducing the pension liabilities “could translate into a higher rating,” the agency wrote. Moody’s and Standard and Poor’s both said Vermont has a demographic problem. “Vermont’s population of 624,594 has declined at an increasing rate in the past three years,” Standard and Poor’s wrote. “We anticipate that the relatively weak demographic trends in recent years will persist and continue to dampen the state’s economic growth potential.”

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