Gov. Rick Snyder today announced that Fitch Ratings has upgraded Michigan's general obligation credit rating to AA, the first time Fitch has rated Michigan above AA- since January 2007. Fitch said the upgrade reflects "the state's solid economic and fiscal recovery over the last two years."
Also today, Standard and Poor's upgraded Michigan's credit outlook to "positive," while affirming its AA- rating. Moody's announced a similar upgrade last week.
"Michigan is the comeback state and our progress is being recognized," Snyder said. "Within a week, we have seen positive movement from all three Wall Street rating agencies. That sends a clear message that Michigan is on the right track and moving forward."
Less than two weeks ago, Snyder, State Treasurer Andy Dillon, and State Budget Director John Nixon met with representatives of the three major rating agencies to discuss how Michigan's credit profile had improved significantly over the last two years.
"We had a very strong case to present to the rating agencies," the governor said. "The state budget is now in structural balance and we have a growing budget stabilization fund. We also have reduced the state's long-term liabilities. These steps are all positive for our customers - the people of Michigan - and for the state's long-term fiscal and economic health. The actions by the rating agencies reflect the solid progress that we've made over the past two years."
Fitch agreed, noting: "The state has used the economic and revenue momentum of the last two fiscal years to stabilize state finances, with structurally balanced budgets, annual surpluses, higher liquidity and sizable deposits to the budget stabilization fund (BSF)…The state's long-standing prudent fiscal management, combined with the actions taken in recent years, leave it better positioned to address future economic and revenue uncertainty."
"Since taking office, this governor has been relentless that we needed to fix the state's fiscal problems now, rather than just ignore them and hope someone would fix them in the future. The state is in a much better financial position today than it was two years ago because we were willing to make some difficult decisions and take a responsible approach to spending taxpayer dollars," Dillon said. "We are on the right path and there is no doubt we will continue to take the steps to keep this momentum going."
In its announcement, Fitch also noted Michigan benefits from low-to-moderate long-term liabilities. "Net tax-supported debt has been and is expected to remain in the low-to-moderate range. Obligations for retiree pensions and health care are manageable and the state continues to pursue additional savings."
"We took action to make the needed reforms related to our long-term unfunded liabilities," said Nixon. "Debt from pension and retiree health care costs was strangling the retirement systems for both state and school employees. Our actions have reduced those long-term liabilities by more than $20 billion. Those steps not only helped put the state's fiscal house in order, but they also put those retirement systems back on solid financial ground, which is crucial to the thousands of employees counting on those benefits."