As reported in the Milwaukee Journal Sentinel, the bond rating firm Standard & Poor’s has assigned its second-highest rating to Wisconsin general obligation bonds while reaffirming a similar rating on bonds the state had previously issued:
S&P said the AA ratings are a result of, in part, “the state’s proven ability to make budget corrections in midyear in order to maintain fiscal balance with low-but-adequate general fund reserves.”
[…]
“Wisconsin’s economy has proven resilient in recent years, with a large and diverse manufacturing sector and unemployment rate below the national average,” said S&P credit analyst John Kenward.
S&P defines an issuer of AA-rated bonds as having a very strong capacity to meets its financial commitments, and a higher bond rating helps governments borrow money on terms that are more favorable – and less expensive. It’s also worth noting that despite the state’s recent budget woes, S&P gave Wisconsin general obligation bonds a “stable” outlook, and in doing so, S&P said that outlook reflected their expectation that Wisconsin’s fiscal discipline in reducing structural budget deficits would continue.
I’m not an economist by trade, but it certainly seems like a very good indicator of the state’s economic health that one of the nation’s most important bond rating firms has given Wisconsin a “clean bill of health” when it comes to the state’s financial stability.
But then again, the S&P had its highest rating–a AAA rating–on the mortgage backed securities that collapsed and caused this economic downturn.
So I’m not sure what a AA rating means anymore.
You do raise a good point…I hadn’t thought of that.
The City of Milwaukee maintains an equally high rating from S&P. MOTWYW.
I wouldn’t read anything into this either way. Most states are AAA or AA. It’s not really comparable to corporate bonds in that governments have a very low risk of default because of their ability to confiscate whatever they want in the form of taxes in order to pay off debts.