CHICAGO — Minnesota's flush coffers and structural budget balance finally translated into some positive rating news with Standard & Poor's move Wednesday to revise its outlook on the state's AA-plus rating to positive from stable.
"The outlook revision reflects the state's payment of its deferred liabilities and improved structural balance alignment," said Standard & Poor's analyst John Sugden.
The rating, which was released on the same day the state sold its largest single general obligation issue to date in a $1.1 billion competitive transaction, is supported by the state's deep and diverse economy, improved financial results, moderate debt levels, and elimination of a structural budget imbalance.
The rating agency did warn that challenges remain to maintaining the state's budget improvements as divided political government in the past has resulted in the state's heavy reliance on non-recurring revenues to erase red ink. Gov. Mark Dayton is a member of the state's Democrat-Farmer-Labor Party that enjoys a Senate majority while the GOP controls the House.
For a two-year period, Dayton enjoyed DFL control in both chambers allowing him to push through an income tax hike on top earners in 2013 which helped the state structurally balance its books and increase funding for education. This year's $2 billion surplus year marks a sharp contrast to the state's situation just a few years ago as it struggled with a $5 billion deficit.
"Should the state continue to demonstrate a strong commitment to structural balance and avoid using payment deferrals or shifts, while managing budget growth pressures, we could raise the rating," the rating agency said.
"This is great news for Minnesota," Dayton said in a statement. "It proves that our financial management is on the right track."
The sale Wednesday included a mix of new money and refunding bonds for present value savings.
Barclays Capital won the $386.50 million of Series 2015D general obligation state various purpose refunding bonds with a true interest cost of 2.18%. Citi won the $368.23 million of Series 2015A GO state various purpose refunding bonds with a TIC of 2.93%. Bank of America Merrill Lynch won the $310 million of Series 2015B GO state trunk highway bonds with a TIC of 2.88%. Robert W. Baird won the $14.89 million of Series 2015E GO state trunk highway refunding bonds with a TIC of 2.14%. Wells Fargo Securities won the $7.2 million of Series 2015C taxable GO state various purpose bonds with a TIC of 2.43%.
Public Resources Advisory Group was the financial advisor and Kutak Rock was bond counsel for the sale. Ahead of the sale, Fitch Ratings affirmed the state's AA-plus rating and stable outlook and Moody's Investors Service affirmed its Aa1 and stable outlook.
— Chip Barnett and Aaron Weitzman contributed to this story.
