PHOENIX - Moody's Investors Service has downgraded Alaska to Aa1 from Aaa.
The downgrade, announced Tuesday, affects $744.2 million of outstanding GO debt. Moody's also downgraded lease-appropriation bonds and certificates of participation to Aa2 from Aa1 and the state's moral obligation debt to Aa3 from Aa2. The outlook is negative.
Alaska, which faces a more than $3 billion budget deficit caused by falling oil prices, is scheduled to sell just over $150 million of GO bonds next week.
"The downgrade to Aa1 reflects the heightened volatility in Alaska's revenues and the unprecedented structural imbalance caused by it," Moody's said. "The state's financial reserves are large, but recent budgets have been calibrated to oil prices above $100 per barrel, not prices forecasted to be less than half that though the next four years. Even with significant spending reductions, recurring revenues cannot keep pace with recurring expenditures, and the state would deplete its main budgetary reserves by fiscal 2019, absent significant changes in its financial framework."
The Moody's downgrade comes a day after Fitch Ratings placed Alaska's AAA rating on a negative watch that the agency said should be resolved when the state passes the budget lawmakers are currently working on. S
tandard & Poor's already downgraded the formerly unanimously triple-A rated state in January. Moody's said the state needs to take action.
"Absent significant changes, low oil prices will continue to cause large budget deficits, reserve draws, and structural budget gaps of an unprecedented size for a US state."
