Moody's upgrades Alaska's general obligation bond rating from negative to stable
Alaska's general obligation bond rating has been upgraded from negative to stable by Moody's Investors Service, one of the state's top three bond rating agencies.
The upgraded bond rating will help Alaska and its cities borrow at lower interest rates for capital projects, such as roads, ports and schools, according to state officials.
"I am pleased with this increased confidence in the future of our great state," Gov. Frank Murkowski said in a statement. "I think it is clear that our outlook has improved significantly since 2002."
The bond rating is determined by the overall economy of the state and is based partly on budget deficits and surpluses.
The state has had a negative bond rating from Moody's since 2002, said Tom Boutin, deputy commissioner for the state Department of Revenue.
He said the administration has opened a dialogue with the three bond agencies - Moody's, Standard & Poor's, and Fitch Ratings - in an effort to remove the negative outlook.
Municipalities and quasi-governmental organizations, such as the Alaska Housing Finance Corp. and the Alaska Industrial Development and Export Authority, also would benefit from the improved rating by allowing them to borrow money at lower interest rates, according to Boutin.
"We are an economy that is linked to some of the same industries," he said.
The Moody's report notes that oil production represented 84 percent of the state's general fund revenue in 2005. Conservative revenue projections by the administration on oil prices was a contributing factor in the rating upgrade, according to the report.
"The budget for fiscal year 2005 was adopted based on an expected oil price of $28.30 per barrel," the report said. "But for the first five months of the fiscal year the state has averaged about $42 per barrel."
The difference between the estimate and the reality could result in a budget surplus of $300 million $500 million, according to the report.
"However, the need to make progress toward adopting fiscal reforms that will enable the state to achieve sustainable structural budget balance still remains," the report said.
Boutin said congressional approval of $18 billion in loan guarantees for the Alaska gas pipeline and the Bush administration's support for opening the Arctic National Wildlife Refuge for oil drilling also has gained the attention of the credit markets.
• Timothy Inklebarger can be reached at timothy.inklebarger@juneauempire.com.