LOS ANGELES -- Nevada's conservative budgeting practices and willingness to adjust to a softer economy help to buttress the state's credit rating as it prepares today to sell its largest general obligation bond sale ever, rating agency officials said.
Moody's Investors Service and Standard & Poor's Corp. have affirmed their double-A assessments on Nevada's general obligation bonds, citing the state's moderate debt burden and favorable financial performance.
Nevada plans today to take competitive bids on $193.5 million of general obligation [limited tax] bonds, including $169.6 million of capital improvement debt and $23.9 million of various-purpose bonds.
The state accumulated surpluses throughout the 1980s, when revenues exceeded projections. Nevada also ranks as the nation's fastest-growing state, with a 50% rate of population growth over the last decade.
In recent months, however, Nevada began feeling the economic downturn affecting states nationwide.
For example, the budget adopted last summer for the 1991-1993 biennium, which began July 1, projected a 7.25% increase in sales tax revenues in fiscal 1992 over the previous fiscal year. Based on two months of available data, however, year-to-date sales tax collections are actually 3.95$ less than for the same period in fiscal 1991.
But rating agency officials noted that Nevada officials are making the necessary adjustments to cope with the economic softening.
"They're doing waht they need to do" in terms of corrective measures, said Renee Bolcourt, assistant vice president of state ratings at Moody's.
These measures include a hiring freeze and postponement of cost-of-living increases scheduled this month for state employees. Gov. Bob Miller also has requested all state agencies, school districts, and the university system to prepare budget reduction plans.
Last summer, state legislators also adopted a new business tax, despite heated debate because of Nevada's traditional low-tax reputation.
Rating agency officials said such actions give them added comfort, particularly because Nevada has a tradition of conservative budgeting practices.
"It seems they have things pretty well in hand," said Ernest Perez, a vice president at Standard & Poor's.
Proceeds from today's proposed sale will fund various capital improvement and acquisition projects, including those for prisons and the University of Nevada.
"Compared to many states, we're in excellent shape," said Paul Howarth, a co-financial adviser to Nevada.
Mr. Howarth noted that Nevada officials "learned a lot in the early 1980s" about coping with an economic slowdown and they have "budgeted accordingly since then."
The general fund budget adopted by the 1991 Legislature projects the state's unappropriated balance to be $50.8 million on July 1, 1992, and $73.7 million on July 1, 1993, including up to $50 million reserved for budget stabilization.
Effective Jan. 1, 1993, the budget prepared by the governor must provide for a reserve of not less than 5%, nor more than 10%, of all proposed general fund operating appropriations and authorizations.
Including today's sale, Nevada will have $426.6 million of general obligation bonds outstanding that are paid with property tax revenues.