To get a state budget passed, Minnesota used a bit of tricky accounting -- a lot of borrowing here, a lot of delayed payments there -- to make the numbers work on paper. The tricks didn't fool Moody's Investor Service, the premiere credit rating agency which downgraded the state's rating from "stable" to "negative."
In other words, the same people who thought everything was swell just before the housing and credit crisis think Minnesota's in trouble. Gulp.
In a statement yesterday, Minnesota Management & Budget Commissioner Jim Schowalter blamed the short-sighted budget deal.
"Sooner or later, we need to fix the state's budget so that it does not rely on one-time solutions," Schowalter said.
Moody's is one of the three major credit rating agencies. Standard & Poor's, a powerhouse rating agency with a similar share of world markets to Moody's, still rates Minnesota Triple-A, its highest rating.
Fitch Ratings, the smallest of the "Big Three" rating agencies, downgraded Minnesota from Triple-A to AA+, which doesn't really sound that bad, in early July. That Fitch did so in the heart of the government shutdown is pretty bad; that Moody's waited, took a look at the budget deal and still downgraded the state's credit rating is even worse.
The last time the state got its credit rating downgraded, it took 15 years to get it back to normal, according to the MMB.
To fix the $1.4 billion budget deficit, the legislature bumped a $700 million payment to the state's public schools, and dipped in to $700 million in leftover settlement money from the state's lawsuit against tobacco companies in the late 1990s.
In his letter reluctantly agreeing to end the shutdown, Dayton said that he wanted the state's services to resume, but warned Republicans that their "plan achieves this goal, not by permanent sources of funding, but rather by borrowing an additional $1.4 billion."
That warning is exactly why Moody's downgraded the state's rating. Moody's analyst Kimberly Lyons told the Star Tribune that the state's unwillingness to either raise taxes or cut spending "makes Minnesota an outlier."
- Countdown to government shutdown: Who's to blame?
- Dayton offers plan to end shutdown
- Dayton, GOP agree to end shutdown
Mark Dayton is going to be so pissed when he goes to Freecreditreport.com.