Standard & Poor’s Raises Texas’ Credit Ratings to AA+
AUSTIN – Standard & Poor’s (S&P) has raised Texas’ issuer credit and general obligation credit ratings to AA+ from AA based on the state’s strong and diverse economy and strong leadership from the governor and Legislature that has left a projected $9 billion in the state’s Rainy Day Fund. S&P also raised its rating on the state’s appropriation debt to AA from AA-.
“The ratings continue to reflect our opinion of the state's large and steadily diversifying economy, which despite the recession continues to perform better than the nation in terms of both economic activity and employment,” S&P credit analyst Horacio Aldrete-Sanchez said. “Furthermore, we expect that the Texas economy will recover earlier and at a faster rate than most other states given its continued population growth and relatively low cost of doing business, which we expect will contribute to gradual employment gains in 2010, particularly in the health, education and services sectors.”
S&P’s decision was based on Texas’ 2010-11 biennial budget, the state’s strong Rainy Day Fund, and Texas’ low tax-supported debt burden. The higher rating means Texas will pay lower interest on money it borrows, saving of millions of taxpayer dollars.
“In light of the economic downturn affecting the nation, this session we continued to make wise choices, such as cutting taxes on 40,000 small businesses and maintaining a multi-billion dollar balance in our Rainy Day Fund that have helped our state sustain its overall economic strength,” Gov. Perry said. “These prudent and fiscally conservative decisions continue to pay off for our taxpayers.”
“Texas debt has always been well-received in the bond market, but for Texas to receive a rating upgrade in today’s challenging economic environment while other states are being downgraded, speaks to the high quality of the state’s financial stewardship as well as the positive long-term outlook for the Texas economy,” Bob Kline, executive director of the Texas Bond Review Board said.
Additionally, S&P, Moody’s Investors Service and Fitch Inc. have given Texas the highest possible short-term debt ratings for tax and revenue anticipation notes (TRANs), which will be sold later this month.
Texas’ business climate continues to lead the nation with more Fortune 500 companies than any other state, and is the nation’s top exporting state. Last month, Farouk Systems relocated its manufacturing headquarters to Houston, creating 1,200 new jobs and generating $26 million in capital investment. Additionally, National Review recently credited Texas’ small government and low tax environment with attracting jobs and companies from around the nation, and CNBC recently named Texas one of the Top States to do Business for the third year in a row.
“When people look at Texas, they’re discovering that we’ve fostered an environment that encourages people to pursue their dreams, build businesses and create jobs,” Gov. Perry said. “There is no question that Texas’ economy is on a growth trajectory thanks to our dynamic workforce, low taxes and predictable regulations.”
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