Things continue to look brighter across Michigan as the state continues to reopen things following the pandemic. That brighter picture is being reflected in the state’s credit rating which has gotten an upgrade today.
Governor Whitmer has announced this morning that the state of Michigan’s improving economy and multi-billion-dollar revenue surplus coming out of the COVID-19 pandemic have prompted Fitch Ratings to improve the state’s general obligation bonds AA credit rating from a “stable outlook” to a “positive outlook.” The State of Michigan recently announced new revenue projections taking the state from a nearly $3 billion deficit to a $3.5 billion surplus. The move is an affirmation the state is headed in the right direction, saving taxpayers money by lowering borrowing costs for upcoming bond issues.
The governor says, “This rating is a sign of confidence in Michigan’s hardworking people, close-knit communities, and innovative small businesses,” and adds, “Our early, decisive efforts to respond to the COVID-19 pandemic are paying dividends as we emerge from the pandemic stronger than ever, poised for an economic jumpstart. With billions in federal stimulus and a $3.5 billion state budget surplus, we must continue our forward momentum and channel it into raising wages, invest in small businesses, and uplift families. I look forward to engaging the legislature, local communities and Michiganders as we continue thinking through the best ways to turbocharge our economy and make a real difference in people’s lives.”
In its announcement, which formally rated $603 million of limited obligation revenue bonds to be issued through the Michigan Strategic Fund in support of the Flint Water Advocacy Fund, Fitch noted the state of Michigan’s success in achieving balanced budgets and the expectation that the state’s improved fiscal and budgetary resilience will be sustained.
In addition, Fitch believes the state is well-positioned to benefit from a return to economic growth following the deep recession caused by the coronavirus pandemic.
State Treasurer Rachael Eubanks says, “I am delighted how Wall Street has recognized the hard work and effort taken to react to the impacts of COVID-19 here in Michigan,” and adds, “The credit rating agencies have again displayed confidence in Michigan’s economic and financial health by affirming their credit ratings – with Fitch even boosting their outlook – showing investors that our state is a great investment.”
Prior to offering $603 million of limited obligation revenue bonds, Fitch and Moody’s Investor Services reviews the state’s economy, finances and other factors to determine a credit rating.
Due to the bonds being an appropriation credit of the state, the rating agencies rate the Michigan Strategic Fund bonds one notch below the credit ratings of the state of Michigan. The bonds are rated AA- by Fitch and Aa2 by Moody’s.
The money from this bond sale will be used to make a loan to the Flint Water Advocacy Fund for the purpose of transferring $600 million to the Flint Water Crisis Qualified Settlement Fund in accordance with a settlement agreement entered between the state of Michigan and plaintiffs concerning state defendants’ legal liabilities related to the Flint Water Crisis.
During the May Consensus Revenue Estimating Conference, the Michigan Department of Treasury and state House and Senate Fiscal Agencies agreed to revenues $3.5 billion more than anticipated in January. Federal stimulus programs and an improving public health situation were attributed to that increase.
