State Treasurer Says, Credit Rating Actions Signal Depth of State's Fiscal CrisisContact: Terry Stanton, (517) 335-2167
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State Treasurer Robert J. Kleine issued the following statement today, regarding announced changes to Michigan's General Obligation Bond Rating by Wall Street Rating Agencies. Fitch Ratings downgraded Michigan's credit rating from AA with a Negative Outlook, to AA- with a Stable Outlook. Moody's Investors Service revised its outlook for Michigan's Aa2 credit rating from Stable to Negative.
"The action by these respected agencies signals to the world the depth of the fiscal crisis Michigan is facing," said State Treasurer Robert J. Kleine. "Wall Street recognizes that many tough questions remain, amid the continuing struggles of the domestic auto industry, which are having devastating affects on Michigan's economic and revenue picture."
In announcing the downgrade, Fitch said it "reflects Michigan's economic decline and the state's resulting deteriorated financial condition, both of which have accelerated over the past few months…" Fitch analysts did cite the state's "strong management, lower moderate debt levels, and still-considerable economic resources." However, in discussing budget difficulties, Fitch said the Fiscal Year 2008 budget is "complicated" by the sunset of the Single Business Tax and that "Delays in reaching an agreement on replacing the tax would lead to further credit uncertainty."
Treasurer Kleine said, today's credit rating actions are clear proof Michigan must address its structural budget problems and work to stimulate economic growth, in the midst of what has become a competitive, global economic environment, the likes of which the state has never experienced.
Since January of 2003, the Granholm administration has cut more than $3 billion in state spending, to correct $4 billion in deficits. Fitch cited those efforts as well as its expectations the state will effectively manage the situation in the future. "The state has demonstrated a willingness to manage the downturn and remedy budgetary imbalances through prompt corrective actions. Fitch expects this willingness will hold true as policymakers debate remedies for the fiscal 2007 and 2008 shortfalls and the replacement of business tax revenues."