CHARLESTON, W.Va. — The Justice administration said Fitch Ratings, one of the big three bond ratings agencies, has assigned a AA rating to West Virginia’s upcoming $800 million general obligation bond sale.
Fitch upgraded West Virginia’s rating outlook from negative to stable, the Justice administration said.
Such ratings are important — not only because they reflect on West Virginia’s economic picture — but because better, more confident ratings increase the state’s borrowing power.
“They get what’s happening within our state, and they’re going to tell our story,” Gov. Jim Justice said.
During a news conference today, Justice said he and several members of his administration had met recently with representatives of the bond ratings agencies.
The change is a welcome turn from recent ratings by the agencies.
All three big agencies — Fitch, Moody’s and Standard & Poor’s — downgraded their West Virginia ratings during 2016 at the height of the state’s budget struggles.
Fitch still expressed caution in its West Virginia outlook today.
But Fitch cited relatively stable management of West Virginia’s fiscal resources despite economic pressures brought on by challenging times in energy markets particularly coal.
“The revision of the outlook to Stable from Negative incorporates recent stability in key revenue sources, the state’s proactive management of financial operations during this period of fiscal stress, improved expenditure controls for its Medicaid program, as well as modestly stabilizing economic indicators,” the bond rating agency wrote.
“Fitch believes active management of operations will be vital to maintaining credit quality given the structural decline of coal production and its direct effect on key revenue sources.”
Fitch described decent remaining reserves for the state, which did not use the Rainy Day Fund to balance the budget for the coming fiscal year.
“The ‘AA’ ratings are supported by the still sizable level of reserves at the state’s disposal, which provides financial cushion as the state strives for budgetary equilibrium with its evolving economy,” Fitch wrote.
Fitch concluded that West Virginia can handle the debt brought on the the imminent road bond sale.
“West Virginia’s outstanding debt is low although new GO authorization will increase the burden,” the rating agency wrote.
Analysts also wrote, “West Virginia maintains a moderate long-term liability position that should remain a manageable burden on resources despite planned additional borrowing for road projects.”