Governor Deal announced last week that Georgia had once again earned a AAA bond rating from the three main agencies- Moody’s, Fitch and Standard & Poor’s. Only 11 states are currently ranked AAA and Georgia reaped the rewards as it sold $1.37 billion in bonds.
According to data from the Pew Trusts, Georgia is only of seven states to have maintained a AAA bond rating since 2001. The worst? Currently Illinois, edging out California. California has the distinction of the only state receiving a lower than A- rating since 2001, notching a BBB during the gubernatorial recall crisis of 2003. Several of Georgia’s neighbors share the AAA rating, including Florida and North Carolina. The Southern region is mixed, with Kentucky coming in the lowest at AA-.
Georgia’s success is tied to the growing economy and consistent funding of retirement plans for state employees, as well as proper investing in the state’s Rainy Day Fund. The high credit rating means Georgia saved potentially millions of dollars in borrowing costs. According to Moody’s, ” The highest rating is supported by Georgia’s conservative fiscal management, demonstrated by the rapid replenishment of budgetary reserves after the last recession, as well as the state’s moderate debt burden and diverse economy…Georgia’s strong governance framework and financial management practices have helped to support the state’s Aaa rating over many years.”
The Georgia State Financing and Investment Commission approved the sale of the bonds for a variety of projects. The University System of Georgia will get $287 million, with nearly $248 million slated for k-12 schools. The Technical College System of Georgia will also get $126 million for various projects.
The biggest portion of the sale, more than $450 million, were sold as “refunding bonds” to refund more than $500 million of bonds sold from 2003-2007. This move will save the state more than $88 million in debt service. Deal noted the importance of holding onto the AAA rating and how doing so can save the state significant funds. “The state of Georgia works diligently to hold onto its coveted AAA rating each year,” said Deal. “Homeowners avoid paying excessive interest on mortgages, college students prefer low-interest loans and we as a state strive to avoid paying more interest on our bonds than we already must do. I am proud that our fiscal responsibility can translate into a better use of taxpayer resources.”
For comparison sake, the U.S. as a whole had its credit rating downgraded in 2011 and is currently stable at AA+. Expect to hear that phrase “debt service” a lot over the next few years or decades. Georgia Senator David Perdue has been particularly vocal warning about U.S. debt and how debt service may inhibit the country’s ability to fund projects in the future.
