Friday, June 23, 2017
NOTES FROM THE SENATE, JUNE 23, 2017
GEORGIA KEEPS 'AAA' RATING ON BOND SALE
This week the state went to the bond market for the sale of $1.39 billion in bonds for various infrastructure projects around the state. Additionally, the state saved $43.8 million in interest by refunding previously issued bonds. All three major rating agencies affirmed the state's triple 'AAA' rating which is the highest grade for ratings, and affirmed the strong financial position of Georgia's economy.
In issuing their rating, the agencies noted continued strengths of the Georgia economy, financial management, strong revenue shortfall reserve (RSR), and low overall debt burden.
BROAD-BASED ECONOMY KEY TO REBOUND
Fitch noted the state's conservative debt management, proven willingness and ability to support fiscal balance and a broad-based growing economy. They also highlighted the many proactive measures taken when revenues were declining to maintain fiscal balance. The rebuilding of the Revenue Shortfall Reserve (RSR) was highlighted as an asset. Moody's cited the resilient economy, strong management and governance practices and continuously positive financial results since the recession as key credit strengths for the state. S&P cited the well-diversified and broad-based economic growth that is outpacing that of the nation. They also pointed to an employment base that is concentrated around Atlanta but is broad-based. S&P continued with optimism, highlighting a favorable outlook for the state. "Over the medium and long term, we believe that Georgia's low cost of living, strong transportation network, weather, and favorable business costs are likely to continue attracting business investment and jobs."
SOLID TAX STRUCTURE - LOW DEBT
Fitch pointed to the state's solid taxing structure, "Georgia's revenues, primarily income and sales taxes, will continue to reflect the depth and breadth of the economy, and its solid growth potential." The state's operating performance also was also mentioned as key by Fitch, with a history in "financial flexibility during economic expansions, which is important given the state's above average revenue volatility." Cited by Moody's, debt service itself has fallen from 7% of revenues in 2012 to 5.4% in 2017, and one of the state's governance strengths is the commitment to limiting growth in debt. The state also has a solid financial footing, observed in Moody's commentary on the state's liquidity which in 2017 carried generally more than 10% of revenues and was sufficient to meet all short-term obligations.
STRONG AND STEADY; INCREASING THE REVENUE SHORTFALL RESERVE
Through the Governor's strong management and the General Assembly's partnership, the state has built up a strong rainy day fund or Revenue Shortfall Reserve (RSR). Each rating agency mentioned Georgia's healthy RSR with S&P noting "as of 2016, the reserve is 9.14% of revenues." Fitch observed the state's progress in rebuilding the RSR balance, which was over $2 billion at the end of the last fiscal year. Finally Moody's highlighted the strong RSR by remarking "the best expression of Georgia's ever-strengthening finances is the persistent build-up in its rainy day fund."
The National Association of State Budget Officers (NASBO) Spring 2017 report places Georgia as 4th behind only the reserves of Texas, Alaska and California at the end of FY16. At the end of this fiscal year, Georgia anticipates adding any surplus to the rainy day fund, while seven states are predicting declines to their RSR balances.
HAVE YOU GOTTEN YOUR STATE TAX REFUND?
Our column last week brought complaints by Georgia taxpayers in the Fourth District that they were waiting on tax refunds for months, even in one case, extending beyond the 90 days the state said it might take to issue the refund.
So, if you have filed your Georgia income tax return back in February and have not received your refund, please contact me at email@example.com.
As always, I welcome any questions you may have.