Fitch Ratings says WV is on good financial footing
CHARLESTON, W.Va. - Fitch Ratings on Wednesday affirmed its high ratings on more than $900 million in state-backed bonds, saying the state's well-managed finances and ample reserves put West Virginia on good footing for paying back its debts.
The New York-based ratings agency said it is maintaining its 'AA ' rating on the state's $487.9 million general obligation bonds, and also kept its 'AA' rating on the $433.7 million in appropriation-backed bonds issued by the state Economic Development and School Building authorities.
Both ratings place the bonds in investment grade territory and are an indication of very high credit quality. According to Fitch's ratings scale, the rankings "indicate very strong capacity for payment of financial commitments" and are "not significantly vulnerable to foreseeable events."
In addition to the ratings, Fitch also said its ratings outlook for the state remains stable -- an indication that the ratings are not likely to change in the near future.
The ratings firm cited the state's well-managed financial operations, sizable reserves and manageable debt and pension liability position to support the high ratings.
While it noted that tax revenue suffered somewhat over the last fiscal year, the agency said Gov. Earl Ray Tomblin's efforts to enact 7.5 percent budget cuts at most agencies without tapping the state's Rainy Day Fund supported its ratings outlook.
"The state's focused and disciplined efforts to address its accumulated financial challenges have supported generally successful financial operations," the agency said in its ratings announcement.
"The governor's broad powers to cut spending aided the state in addressing the revenue shortfalls," the report said.
Tomblin lauded Fitch decision in a statement released Wednesday afternoon.
"This is a direct result of the hard work the State has put forth to keep our financial house in order," he said. "West Virginia's solid commitment to addressing its financial obligations, such as our retirement systems and other post-employment benefits (OPEB), shows rating agencies that we pay our bills and honor our debts."
Administration officials said the ratings affirmation will help the state continue to finance infrastructure and economic development projects at low interest rates.
"A stable bond rating is great news for all West Virginians," said acting Revenue Secretary Jason Pizatella. "With this rating outlook, we will continue to confront the financial and economic challenges ahead while our state government keeps its promise to be good stewards of taxpayer dollars."
Fitch also noted the size of the state's Rainy Day Fund is now equal to more than 20 percent of annual tax collections, one of the highest levels of any state.
The only weaknesses Fitch noted were the state's below-average demographics related to income and personal wealth and its only modestly diversified economy.
"West Virginia's economic base has diversified, though significant exposure to the cyclical natural resources industry remains, particularly the weakened coal industry," Fitch noted.
The agency said that while the state has relatively low personal income rankings, income has improved faster than the national average in recent years.
"West Virginia's economy had generally been marked by low and generally slow-growing personal income but performance through the recessionary years was notably stronger than that of the nation," Fitch said.
It noted that the state's 2008 personal income growth was 39 percent better than that of the nation, and while it declined by 0.6 percent in 2009, that performance was better than the national decline of 4.8 percent.
Fitch noted that the state's rate of personal income growth in 2012 was more in line with the rest of the country, with West Virginia personal incomes growing at 3.2 percent compared to a national rate of 3.5 percent.
"As a result of the improved performance, West Virginia's per capita personal income now ranks 47th of the states, at 80.8 (percent) of the U.S. rate, a relatively high percentage for the state," Fitch said.
Contact writer Jared Hunt at firstname.lastname@example.org or 304-348-4836.