State finance officials announced today that Standard and Poor's rating agency has downgraded Minnesota's bond rating from AAA to AA+.
Two other rating agencies took similar action earlier this year. Fitch lowered its rating to AA+ in July, and Moodys rated the state as Aa1. In a news release, Minnesota Management and Budget Commissioner Jim Schowalter said the downgrade was a direct result of the recently passed state budget.
"The budget was substantially balanced using one-time measures and does not lead to a long-term financial solution," Schowalter said. "The rating agency also cited diminished reserves, further payment delays, and the reliance on tobacco bonds for their decision."
MMB said the last time the state was downgraded from AAA it took fifteen years to regain the highest rating. The lower rating will be a factor next week when the state sells bonds.
Democrats were quick to react and point fingers. Gov. Mark Dayton issued the following statement:
"The downgrading of Minnesota's credit rating is very disappointing but not surprising, given the fiscal irresponsibility of the legislature's Republican majority. Standard and Poor's specifically cited the use of one time measures, which would not have been necessary had my proposed budget been adopted."
House Minority Leader Paul Thissen, DFL-Minneapolis, also issued a statement:
"Every day that passes, the consequences of the Republicans' beg, borrow, and steal budget solution become more glaring. Our kids started the school year in debt, with nearly half of their schools asking taxpayers to fill their budget gaps. Now the Republican-forced loans that schools, cities, and counties are seeking will come at a higher cost.
We have warned Republicans for years that their insistence on borrowing would have consequences for our state, but they refused to listen. With property tax bills rising, schools falling deeper into debt, and our state's credit rating declining, we are all paying for the Republican majority's refusal to listen to Minnesotans and solve our chronic budget problems in a balanced and responsible way."
Republicans weighed in too. House Speaker Kurt Zellers, R-Maple Grove, said the downgrade is probably more of a statement of where the national economy is than where Minnesota is. In an interview, Zellers also said the new rating is a reminder that state spending needs to match state revenues.
"We need to match our spending with the revenue that;s coming," Zellers said." We're not going to do that if we either do short-term borrowing. One-time borrowing or especially is we pass a massive tax increase that will never show up. The dollars that we pass will never show up."