Georgia Retains AAA Ratings for 21st Consecutive Year

Staff Report From Georgia CEO

Thursday, June 21st, 2018

Gov. Nathan Deal announced Georgia again earned a rating of AAA, with a stable outlook, from each of the three main credit rating agencies — Moody’s, Fitch and Standard & Poor’s. Of the states that issue general obligation bonds, only nine currently meet this standard. These ratings resulted in low interest rates during the sale of state general obligation bonds to fund $1.32 billion for new projects.
“Throughout my administration, Georgia has remained a leader in fiscal conservatism,” said Deal. “The coveted AAA ratings from all three rating agencies demonstrate Georgia is a state that lives within its means, as we are ensuring we can meet our present and future obligations. Maintaining these ratings has been one of my top priorities as governor and I am proud Georgia is one of only nine states issuing general obligation debt to earn this distinction. For the 21st consecutive year, we have maintained these ratings while enacting historic tax cuts and fully funding K-12 education.
“Georgia’s fiscal leadership has made our bonds highly sought after among investors, and as a result, our low interest rates for borrowing save our taxpayers millions of dollars every year. Thanks to conservative budgeting and investments that produce positive results, we continue to strengthen our reputation as the No. 1 state for business. Georgia is a well-managed and reliable state in which to invest and locate, and these ratings reflect this.”
The credit rating agencies cited the strength of Georgia’s economy with a positive employment trend, growth of the state’s rainy day fund, a balanced approach to the state’s primary revenue sources and consistent funding of obligations as factors contributing to the AAA ratings.
The state achieved rates of 1.88 percent for the five-year tax-exempt bonds, 2.26 percent for the 10-year tax-exempt bonds and 3.08 percent for the 20-year tax-exempt bonds, for a blended rate of 3.01 percent for the tax-exempt bonds. Some bonds were sold as federally taxable bonds, with those rates at 2.65 percent for the five-year taxable bonds, 3.02 percent for the 10-year bonds, and 3.62 percent for the 20-year taxable bonds, for a blended rate of 3.54 percent for the federally taxable bonds. The interest on all the bonds is exempt from Georgia state income taxation for in-state residents.
The Georgia State Financing and Investment Commission (GSFIC), which is responsible for issuing the bonds, approved the sale at its meeting today. The greatest amount of funding will provide $485.115 million for higher education (the University System of Georgia, Georgia Military College and the Technical College System of Georgia), followed by $396.15 million for K-12 schools and $212.475 million for transportation projects.
The bonds also will provide $85.02 million for economic development and water/sewer projects, $70.535 million for other projects such as local libraries and public health facilities, $35.8 million for public safety projects and $35 million for the Savannah Harbor Expansion Project. A complete list of funded projects is available on the GSFIC website.
Moody’s, Fitch, and Standard & Poor’s individual ratings are Aaa, AAA and AAA, respectively, which are the highest ratings available and indicative of sound fiscal management.
Excerpts from the Bond Rating Agency Reports (full reports are available on the GSFIC website):
Moody’s Investors Service: “Georgia's (Aaa stable) strong credit profile reflects relatively low debt and pension obligations and robust fiscal management and governance. … Georgia's economic growth has driven robust revenue growth. … The revenue out-performance has strengthened Georgia's finances and has contributed to the persistent build-up in its rainy day fund, the revenue shortfall reserve. … Georgia's long-term liabilities are moderate, and unlikely to grow to a level that pressures the state's budget. … Georgia's strong governance framework and financial management practices have helped to support the state's rating over many years.”
The Fitch Ratings’ report: “Georgia's 'AAA' IDR reflects the state's conservative debt management, proven willingness and ability to maintain fiscal balance and a broad-based and expanding economy with growth outpacing national trends. The state proactively addressed weakened revenues during the great recession through steep spending cuts and draws from its rainy-day fund (the revenue shortfall reserve [RSR]). Since then, Georgia has maintained a conservative approach to fiscal management, by limiting spending growth and making progress in rebuilding the RSR balance. The state's longterm liability burden is low.… The state has consistently met its actuarial pension contribution commitments and generally avoided non-recurring budget balancing measures since pulling out of the recession.”
Standard & Poor’s Rating Services: The report stated that the ratings reflected the agency’s assessment of Georgia’s “well-diversified and broad-based economic growth that is outpacing that of the nation; strong financial monitoring and oversight with a history of budget adjustments, mainly through expenditure reductions, to restore fiscal balance; additional flexibility provided by continued growth in the revenue shortfall reserve (RSR); moderate debt position bolstered by rapid amortization; and proactive management of long-term liabilities through full funding of the state's portion of pension contributions and the creation of other postemployment benefit (OPEB) fund reserves.”