RELEASE: Minnesota's Rating Outlook Improved to Positive; State Sells $1 Billion General Obligation Bonds

For Immediate Release - Aug. 5, 2015

Minnesota's rating outlook improved to "positive" by Standard & Poor's; State sells over $1 billion general obligation bonds in single largest issuance in state history

St. Paul—Ahead of the state's general obligation bond sales today, Standard & Poor’s improved the state’s outlook from stable to positive.

“This is great news for Minnesota,” said Governor Mark Dayton. “It proves that our financial management is on the right track.”

“Today’s bond sale and positive outlook by S&P illustrates investor confidence in Minnesota’s fiscal position. Under Governor Dayton’s leadership we have a balanced budget, growing reserves, and more surpluses on the horizon. Combine that with investments in education and jobs, our economy is thriving” said Myron Frans, Commissioner of Minnesota Management and Budget.

This morning the State of Minnesota completed a billion dollar sale of general obligation bonds. The proceeds support capital construction projects such as higher education facilities, highway projects, and economic and redevelopment projects previously authorized by the Legislature. By essentially refinancing our mortgage, we are saving the state millions of dollars through Fiscal Year 2028.

In addition to the improved outlook by Standard & Poor's, Standard & Poor's and Fitch affirmed the state’s AA+ rating and Moody’s affirmed its Aa1 rating and stable outlook.

Standard & Poor’s revised its outlook to positive from stable on Minnesota’s debt, “reflecting the state’s payment of its deferred liabilities and improved structural balance alignment.” The positive outlook indicates Standard & Poor's could raise the rating over the next two years. Standard & Poor's said, “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.” 

Moody’s said their rating “reflects the state's strong financial management that has resulted in improved revenue performance, replenishment of budget reserves, and structural budget balance. The rating also incorporates Minnesota's sound management tools such as its forecasting process and adjustable reserve mechanism and executive's unallotment authority. Revenue trends are positive, supported by the state's diverse and stable economy.”

Fitch based their rating on the state’s solid financial position, below-average liability burden, and strong economic profile. “The state has increased spending in core program areas, particularly education, while at the same time replenishing reserves and strengthening reserve funding practices by establishing automatic funding mechanisms,” Fitch said. Fitch also noted that the state’s unfunded pension liability is below average, the burden of net tax-supported debt and adjusted unfunded pension obligations is below the U.S. median, and the state has very limited retiree health benefit obligations.

“The high number of bidders and competitiveness of today’s sale demonstrate investor confidence in our state’s financial management. Taxpayers should also feel good about the low interest rates and what that means for long term savings,” said Kristin Hanson, Assistant Commissioner for Debt Management who directed the bond sale. "After today's sale, we remain within our Capital Investment Guidelines," she said.

The five series of general obligation bonds were each sold competitively. The largest of the series of bonds drew an interest rate of 2.93%, which determines the interest cost that the state will incur for these bonds.

Public Resources Advisory Group was the financial advisor and Kutak Rock was bond counsel for the sale.

Contact

Janelle Tummel, Chief of Enterprise Communications, 651-259-3742 office; 612-616-5677 cell