CHICAGO -- Fitch Investors Service Inc. on Friday upgraded Minnesota's general obligation bond rating to AAA with a stable credit trend from AA-plus, citing the state's sound financial practices.
The rating action was taken in conjunction with the competitive sale planned for tomorrow of $2 1 0 million of various purpose general obligation bonds and $148 million of GO refunding bonds. The upgrade covers the state's $1.6 billion of outstanding GO debt as well as the two planned issues.
Standard & Poor's Corp. on Friday affirmed the state's AA-plus rating with a stable outlook, while Moody's Investors Service affirmed an Aa rating on Thursday.
Claire G. Cohen, executive vice president of public finance at Fitch, said that "nothing dramatic" contributed to the upgrade.
"We've seen continuous improvement, and when you stack everything up, [the state] looks awfully good," Cohen said. "This is a good time to take a look at their finances, when the year closes and a new year begins."
In a press release, Fitch said the state ended fiscal 1993 on June 30 with a $657 million balance. Of that amount, $360 million will be held in reserve and $381 million will be used for operations in the 1994-95 biennium.
Fitch said the state's sound financial policies include the maintenance of a cash reserve, frequent revenue forecasting that allows prompt reaction to changing conditions, the implementation of mandatory spending growth limits for fast-growing programs, and reforms in the budgetary process for both operations and the state's capital program.
Gov. Arne Carlson said he was pleased with the upgrade. Stabilizing and improving the financial management of Minnesota has been one of our administration's most important goals," Carlson said in a press release.
State officials said last week that Minnesota general fund receipts totaled $7.5 billion in fiscal 1993, exceeding the state's February forecast by 1%.
Tom Stinson, the state's economist, said much of the positive news is due to higher-than-expected individual income tax withholding receipts received in fiscal 1993.
However, that gain could disappear in April 1994 when higher income tax refunds are paid, state finance commissioner John Gunyou said in a press release.
Stinson said the outlook for future revenues is "guarded" because sales tax receipts have been below expectations since February.
Fitch pointed out that the amount of Minnesota's debt is low to moderate and should continue at its present level under state guidelines, which limit debt to 2.5% of personal income. Debt service appropriations are held to 3% of nondedicated revenues.
Cohen said she did not believe the Midwest flood would have an adverse effect on the state's finances. Thirty-six counties in Minnesota have been designated federal or state disaster areas.
Stinson said it is too early to determine what impact the flood will have on the state.
"We're sure there will be an impact from the flood. Right now, estimating that impact is very difficult," Stinson said. "We don't anticipate losses that will bring the State's economy to its knees. "