Georgia Earns Top Credit Marks from Ratings Agencies

Staff Report From Georgia CEO

Thursday, June 22nd, 2017

Gov. Nathan Deal announced Georgia again earned a rating of AAA, with a stable outlook, from each of the three main credit rating agencies — Moody’s, Fitch and Standard & Poor’s. Of the states that issue general obligation bonds, only nine currently meet this standard. This rating resulted in low interest rates during the sale of $1.39 billion in bonds, which includes $349 million of refunding bonds to refund previously issued bonds and achieve total debt service savings of $43.8 million.
 “The state of Georgia works diligently to maintain the coveted AAA rating, and we are one of only nine states to earn this distinction,” said Deal. “By consistently earning top marks, we ensure our bonds remain highly sought after and provide the state flexibility to secure low interest rates for capital projects. Ultimately, this AAA bond rating reflects our fiscal responsibility and results in millions of dollars of savings for our taxpayers. Thank you to the General Assembly, Chairman Jack Hill and Chairman Terry England for their diligent work and cooperation to keep Georgia a leading state for taxpayer stewardship and economic growth.”

The credit rating agencies cited the strength of Georgia’s economy with a positive employment trend, growth of the state’s rainy day fund, a balanced approach to the state’s primary revenue sources and consistent funding of obligations as factors contributing AAA rating.

The state acquired rates of 1.11 percent for the five-year tax-exempt bonds, 1.5 percent for the 10-year tax-exempt bonds and 2.75 percent for the 20-year tax-exempt bonds, with a blended rate of 2.7 percent for the tax-exempt bonds. Some bonds were sold as federally taxable bonds, with those rates at 2 percent for the five-year taxable bonds, and 3.03 percent for the 20-year taxable bonds, with a blended rate of 2.99 percent for the federally taxable bonds. The interest on all the bonds is exempt from Georgia state income taxation for in-state residents.

The Georgia State Financing and Investment Commission (GSFIC), which is responsible for issuing the bonds, approved the sale at its meeting today. The largest amount of funding will provide $402 million for higher education (the University System of Georgia and the Technical College System of Georgia), followed by $230 million for K-12 schools and $131 million for public safety projects.

The bonds also will provide $110 million for transportation projects and $112 million for economic development and water/sewer projects. A complete list of funded projects is available on the GSFIC website.

In addition, $349 million refunding bonds were sold to refund more than $386 million of bonds that were originally issued in 2007 and 2011, saving the state’s taxpayers more than $43.8 million in debt service when compared to the original bonds.

Moody’s, Fitch, and Standard & Poor’s individual ratings are Aaa, AAA and AAA, respectively, which are the highest ratings available and indicative of sound fiscal management.

Moody’s Investors Service: “The highest rating incorporates the state’s growing economy, solid financial position, modest long-term liabilities and governance practices. … Georgia’s economic growth has driven powerful revenue growth the past six years, contributing to a continuously strengthening financial position.  … Georgia’s long-term liabilities are moderate, and unlikely to grow to a level that pressures the state’s budget. … Georgia’s strong governance framework and financial management practices have helped to support the state’s Aaa rating over many years.”

The Fitch Ratings’ report: “Georgia’s AAA rating reflects the state’s conservative debt management, proven willingness and ability to support fiscal balance and a broad-based and growing economy. The state proactively addressed weakened revenues during the great recession through steep spending cuts and draws from its rainy-day fund (the revenue shortfall reserve). Since then, Georgia has maintained a conservative approach to fiscal management, by limiting spending growth and making progress in rebuilding the RSR balance. The state’s long-term liability burden is low. … Fitch notes the state has consistently met its actuarial pension funding commitments and generally avoided non-recurring budget balancing measures since pulling out of the recession.”

Standard & Poor’s Rating Services: The report stated that the ratings reflected the agency’s assessment of Georgia’s “well-diversified and broad-based economic growth that is outpacing the nation…; strong financial monitoring and oversight with a history of budget adjustments, mainly through expenditure reductions, to restore fiscal balance; additional flexibility provided by the substantial recent growth in the revenue shortfall reserve; moderate debt position bolstered by rapid amortization; and proactive management of long-term liabilities through full funding of the state’s portion of the pension contributions and the creation of other postemployment benefit fund reserves.”