Virginia's bond rating looks safe
Thursday, January 06, 2011
Fredricksburg Free Lance-Star
RICHMOND--Virginia's prized AAA bond rating appears to be in no danger, judging by the reception state leaders received in meetings with national credit rating agencies.
Gov. Bob McDonnell and the leaders of the House and Senate budget committees, including Sen. Edd Houck, traveled to New York on Tuesday for a day of meetings with Moody's, Standard and Poor's, and Fitch-three agencies that set ratings for state governments.
Houck, of Spotsylvania County, said yesterday that the meetings were very positive.
"It was just so gratifying to hear our three credit rating agencies commend Virginia on how it's handled the economic crisis we've been thrown, how we've budgeted, how we've dealt with it," Houck said.
All three companies praised Virginia's fiscal health, Houck said, as well as the fact that legislators from both political parties made the trip.
In addition to Houck and Senate Finance Committee chairman Chuck Colgan, both Democrats, House Appropriations Committee chairman Del. Lacey Putney, an independent who caucuses with Republicans, and Del. Kirk Cox, a Republican from Colonial Heights, attended.
McDonnell also thought the trip went well, according to spokeswoman Stacey Johnson.
"All of the bond rating firms made positive comments about the financial situation in Virginia, and how we are tackling the tough issues such as the budget, retirement system and transportation head-on," Johnson said. "The firms all view the bipartisan effort in Virginia to address these issues as a positive."
Before the trip, Houck had been concerned about proposed changes to the state's debt capacity.
Right now, Virginia limits its debt to no more than 5 percent of revenues in any one year. The change would allow that limit to be 5 percent of revenues, averaged over 10 years.
Houck was worried about what impact that, plus McDonnell's proposal to use bonds to pay for transportation improvements, might have on the state's bond rating.
From what he heard yesterday, he doesn't have worry.
"There were no questions raised about the proposed change, in fact, they fully understand that this proposal is really not changing the debt-capacity model, it's really just leveling it out over 10 years," Houck said.
"They said the main thing is predictability. We've certainly proven ourselves over 20 years, and this is not any radical change. They basically indicated this proposed change in the debt capacity model would not jeopardize our AAA bond rating in and of itself."
Houck said the agencies did raise questions about the Virginia Retirement System, and the increasing amount of its unfunded liabilities.
Virginia is one of only four states that does not require all employees to contribute to their retirement system, but that's changing.
Under a law passed last year, new state workers must pay their own contributions to the VRS system, Now, McDonnell has proposed requiring all state workers to make contributions.
It could be a contentious issue in the upcoming General Assembly session, which began yesterday.
Houck said the rating agencies suggested Virginia needs to make some sort of change to its VRS system to avoid a structural imbalance.
"They understand Virginia and all the other states are going through unprecedented economic times," Houck said.
For additional information contact Ibbie Hedrick at 804-225-2487 or firstname.lastname@example.org.