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22 Aug 2013
State has $62.1 billion in net tax-supported debt outstanding
NOTE: On March 15, 2016, the press release was corrected as follows: In the paragraph regarding methodologies, the publication date of Moody's Approach to the Moral Obligation Pledge was changed from June 1999 to November 2008. Revised release follows.
New York, August 22, 2013 -- Moody's Investors Service has changed the outlook on New York State to
positive, and affirmed the Aa2 rating on New York's $3.5
billion of General Obligation Bonds. Moody's has also affirmed
the ratings on all outstanding appropriation-backed and G.O.-related
bonds as well as various state intercept programs.
SUMMARY RATING RATIONALE
The positive outlook reflects improvements in the state's economy,
governance, financial position and fiscal outlook that, if
continued, would allow the state to improve its reserves and draw
closer to structural balance.
New York's Aa2 general obligation rating reflects the relative strength
and recent resilience of its economy; governance constraints including
a history of late budgets and limited executive authority to reduce appropriations;
a financial position that has improved but remains below average;
a moderate combined debt and pension burden; and sound debt management
and frequently updated financial forecasting. The rating incorporates
notable improvements in the state's economy, governance, financial
position, and budgetary balance over the past three fiscal years,
as well as remaining risks, including weakness in the financial
services sector, continued revenue volatility, and relatively
low fund balance and liquidity positions.
STRENGTHS:
* Broad-based, mature, and wealthy state economy
that attracts a highly-educated and global workforce, and
has shown above-average resilience during the recovery
* Long track record of closing annual budget gaps, and more
recently, with more structurally balanced solutions
* Accumulated rainy day reserves have remained stable for 10 consecutive
years, providing cash flow flexibility, although at comparatively
low levels
* State pension system is well funded compared to other states and
unfunded liability is modest, placing state's fixed costs
at the 50-state median relative to total revenues
* Recent reversal of history of political gridlock, reflected
in timely budgets, implementation of spending controls and move
toward structurally balanced budgets.
CHALLENGES:
* Revenue volatility stemming from the state's dependence on
the financial services sector and income taxes, posing risks to
budgetary balances, liquidity, and financial stability
* Relatively low fund balances provide minimal protection against
revenue volatility
* Above-average state tax-supported debt burden partly
reflects a past record of deficit-related bonding
Outlook
The positive outlook reflects improvements in the state's economy
governance, financial position and fiscal outlook that, if
continued, would allow the state to improve its reserves and draw
closer to structural balance.
WHAT COULD MAKE THE RATING GO UP
* Positive GAAP fund balances to improve liquidity and offset risk
related to volatile personal income tax collections
* Continued adherence to spending controls
* Continued achievement of timely adoption of budgets
* Further movement toward structurally balanced budgets
WHAT COULD MAKE THE RATING GO DOWN
* Economic downturn resulting in lower revenues and larger budget
gaps
* Decline in reserves and liquidity measures reflected in GAAP balances
or a return to large payment deferrals to manage cash flow
* Return to reliance on deficit financing or other non-recurring
budget solutions to fund current operations
* Depletion of Rainy Day Fund without plans to replenish
* Sharp increase in debt issuance leading to increased debt ratio
measures or significant deterioration in pension funding levels
RATING METHODOLOGIES
The principal methodology used in this rating was US States Rating Methodology
published in April 2013. An additional methodology used in the
appropriation-backed ratings was The Fundamentals of Credit Analysis
for Lease-Backed Municipal Obligations published in December 2011,
an additional methodology used in the bonds backed by the moral obligation
pledge was Moody's Approach to the Moral Obligation Pledge published in
November 2008, and an additional methodology used in the enhanced ratings
was State Aid Intercept Programs and Financings: Pre and Post Default
published in July 2013. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
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Marcia Van Wagner
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Emily Raimes
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's moves New York State outlook to positive; affirms GO at Aa2
No Related Data.
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