PHOENIX - Fitch Ratings placed Alaska on a negative watch that the agency says should be resolved when the state passes a budget.
Fitch announced the move Monday as it affirmed its AAA rating ahead of Alaska's $151.18 million general obligation bonds expected to sell competitively the week of March 9.
Also on negative watch are $753.8 million of outstanding GO bonds rated AAA, approximately $244 million of outstanding appropriation bonds and certificates of participation, about $930 million of outstanding Alaska Municipal Bond Bank Authority bonds rated AA-plus, and about $4 million of outstanding AMBBA bonds rated AA.
"The Rating Watch Negative reflects uncertainty in both the execution and impact of budget initiatives to mitigate reserve draws and reduce revenue uncertainty tied to the natural resources sector," Fitch said.
Alaska has been struggling with revenue generation since the bottom fell out of the oil market, a massive driver of economic activity in the state as well as a huge source of revenue from taxes and fees on oil producers.
The state already lost one of its triple-A ratings when it was downgraded by Standard & Poor's in January. Gov. Bill Walker has proposed a budget package that would retool the state's oil and gas tax credit system, cut hundreds of millions of spending, and impose an income tax. The center of the proposal is a proposed Alaska Permanent Fund Protection Act, which the governor has said would use the vast pool of oil money to help close the state's $3.4 billion budget gap while strengthening the fund for future generations of Alaskans.
The state legislature is mulling the approach now.
"Fitch will resolve the watch after analyzing the state's enacted budget for fiscal 2017, which begins on July 1," the rating agency said. "The AAA rating would likely be assigned a negative outlook or downgraded if, in Fitch's view, enacted budget measures do not support appropriate levels of long-term financial flexibility relative to the state's revenue structure."
