Press Release Archive
Thursday, July 2, 2009
Governor Culver: In Spite of Recession, Iowa's AAA Bond Rating Re-Affirmed by Standard and Poor's
High Marks Given to State’s Fiscal Management, Financial Operation
DES MOINES – In a sign of Iowa’s strong fiscal management and stability, Governor Chet Culver, Lt. Governor Patty Judge and State Treasurer Mike Fitzgerald announced today that Standard and Poor’s (S&P), the world’s foremost provider of independent credit analysis, has re-affirmed Iowa’s AAA issuer credit rating (“ICR”), their highest possible rating. Iowa is one of only 11 states to have a AAA rating from S&P.
In addition, S&P gave high marks for the upcoming sale of I-JOBS bonds. S&P rated the I-JOBS bonds as AA, a ‘high grade’ scores. By comparison, an earlier state infrastructure program – Vision Iowa – initially received a rating of A+, also a ‘high grade’ score, from S&P.
“This is good news for Iowa and good news for I-JOBS,” said Governor Culver. “These ratings underscore the fact that, while we are facing tough economic times as a result of this recession, Iowa remains fiscally strong and well-managed. At the same time, we are going to be able put I-JOBS funds to work quickly to rebuild our communities and create jobs.”
“Iowa is in a good financial position, according to the experts, and S&P’s rating is confirmation of Iowa’s stable financial outlook,” added Treasurer Fitzgerald.
S&P Bond Rating
S&P cited five factors in re-affirming their highest rating for the State:
- Diverse and stable economy;
- Good fiscal management, with a demonstrated willingness to restrain spending and make midyear corrections to maintain fiscal integrity;
- Strong financial operations with "rainy day" reserves built up to statutorily mandated levels;
- Good income levels; and
- Very low debt burden.
S&P’s analysis went on to say: “The stable outlook reflects our expectation that the state, with the help of its good management practices, will maintain strong financial operations and strong rainy day reserves despite the challenges raised by the recession, which the state projects will weaken tax revenue performance. Although the state projects it will draw upon its reserves as a result of the economic downturn, we expect that the state will replenish them as per statutory mandate within a reasonable amount of time. The state's diverse economy also supports the outlook.”
S&P went on to say: “The state's debt burden, including capital leases, agency debt, moral obligation debt, debt issued for the Honey Creek State Park project, and the $591 million IJOBS program, totals roughly $920 million in principal currently outstanding, which we feel is low at $307 per capita.”
FY2009 State Budget
Iowa’s high bond rating is due, in part, to the State’s leadership and response to the impact of the national economic recession. Beginning last December, Governor Culver ordered several steps which resulted in $170 million in cuts to state spending and maintained a balanced budget, including:
- Across-the-board budget cut of 1.5% that went into effect on January 1
- Freeze personnel vacancies and new temporary positions, unless approved by Department of Management (DOM)
- Reduce the amount of overtime
- Freeze out-of-state travel, unless approved by DOM
- Reduce in-state travel
- Reduce equipment purchases, service contracts and office supplies
- Cuts in spending by the Regents Institutions, Judicial Branch, and Legislature
- Transfers to the General Fund
- De-appropriate funding for a new state office building
Governor Culver added that he will take additional action, as needed, including further spending cuts and government re-organization in order to maintain a balanced budget and Iowa’s nationally-recognized strong fiscal management practices.
“While Iowa – like every state – faced this economic recession, we did not overreact or under-react but took the appropriate steps to maintain our fiscal strength,” added Governor Culver. “The result has been a balanced budget, no tax increases, and high cash reserves while maintaining our commitment to critical programs and undertaking an effort to create jobs across the state.”
I-JOBS Bonds
The State of Iowa is preparing to issue approximately $600 million in I-JOBS bonds in late July. The S&P AA rating of these bonds demonstrate the safety and security of an investment in I-JOBS, and during these difficult economic times will make them attractive to investors.
The Culver/Judge I-JOBS program will invest $830 million over the next two years to create jobs and improve Iowa’s infrastructure. The funds will be used to further Iowa’s disaster recovery efforts, improve Iowa’s roads and bridges, and invest in public works and buildings. I-JOBS is funded with existing gaming revenue, meaning no increase in taxes.
This is just one more step in the Culver/Judge Administration’s efforts to implement I-JOBS as quickly as possible and put Iowans back to work. Yesterday, the I-JOBS board approved the first eight projects to receive funding under the program at a meeting in Cedar Rapids. To learn more about the Culver/Judge I-JOBS Initiative, visit www.ijobsiowa.gov.