A global rating agency has increased Wisconsin’s underlying bond rating to AAA, marking the first time the state has achieved such a rating from any agency in almost 40 years.
Kroll Bond Rating Agency upgraded the state’s long-term rating for general obligation bonds from AA+ to AAA, citing Wisconsin’s “substantial liquidity, evidenced by a near tripling of budget reserves over the past three years; continuing, healthy revenue growth, despite substantial tax cuts; and an ongoing, post-COVID-19 recovery, fueled by a mature and expanding economy and favorable business climate,” according to information provided by Gov. Tony Evers’ administration Friday.
In addition, S&P Global Ratings increased the state’s long-term rating from AA to AA+. The state also maintains an Aa1 rating from Moody’s Investors Service and an AA+ rating from Fitch Ratings.
The new bond ratings resulted in, unsurprisingly, a partisan rift over whether the Democratic governor or the Republican-controlled Legislature deserve credit for the state’s economic well-being.
“Throughout the pandemic, my administration has worked hard to stabilize our economy and put our state in the best position possible to rebound and recover from the unprecedented challenges of the last year,” Evers said in a statement. “Today’s news is yet another sign that we aren’t just bouncing back to the way things were, we’re making the kind of strategic, long-term investments that will ensure our state economy and our communities are stronger and more resilient than they were before the pandemic hit.”
Some Republicans, however, were quick to point out that the 2021-23 biennial budget Evers signed in July was drafted by the GOP-led Legislature, who worked in a more than $2 billion income tax cut while also eliminating hundreds of policy items proposed by the governor.
“Here we go again. Governor Evers is taking credit for the budget created by the state Legislature,” CJ Szafir, president of the conservative group Institute for Reforming Government, said in an email. “If Governor Evers had his way and his proposed budget was law, Wisconsin would have had a billion dollar structural deficit and almost certainly a credit downgrade. Today’s good economic news is only because Republicans in the Legislature rejected the governors’ progressive wish list.”
The nonpartisan Legislative Fiscal Bureau earlier this month estimated the current two-year budget will produce a roughly $1.7 billion surplus in June of 2023, when the budget expires.
Wisconsin’s AAA rating from Kroll Bond Rating Agency is the first time the state’s underlying bond rating has reached the AAA level since 1982. Kroll last upgraded the state to AA+ in 2017 and S&P’s last rating upgrade was to AA in 2008.
Ultimately, upgraded ratings allow the state to borrow money at lower interest rates, reducing the overall debt service costs to taxpayers.
“Ratings emerge as a major factor in determining the cost of borrowed funds in the municipal bond market,” according to a January report from the Legislative Fiscal Bureau. “Small fractions of percentage point changes in interest rates can translate into hundreds of thousands of dollars in interest costs over the life of large bond issues.”
Jason Stein, research director with the nonpartisan Wisconsin Policy Forum, said lower interest rates can have considerable importance for state infrastructure or capital projects. In addition to reduced rates, better rankings help reaffirm a strong financial standing.
“The biggest benefit of being healthy is being healthy,” Stein said.
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