KBRA Affirms AAA Rating with Stable Outlook for State of Delaware General Obligation Bonds
22 May 2024 | New York
KBRA affirms the long-term rating of AAA with a Stable Outlook for the State of Delaware’s (“the State’s”) General Obligation (G.O.) Bonds. The State's long-term G.O. rating remains anchored by constitutionally-mandated financial management policies, conservative budgeting practices, and ongoing fiscal monitoring, which have fostered consistently favorable financial operations and structural balance. The G.O. Bonds are direct obligations of the State of Delaware, to which its full faith and credit are pledged. Payment of principal and interest is made when due, pursuant to legislative appropriation.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Strong financial management policies and procedures. Comprehensive and timely process for revenue forecasting facilitates consistent fiscal monitoring and long-term planning.
- High levels of financial reserves and strong liquidity position.
- Low fixed costs and a favorable funded ratio for the State’s primary pension fund.
Credit Challenges
- Delaware’s net OPEB liability, among the highest of all U.S. states on a per capita basis and as a percentage of personal income and Gross State Product, has the potential to limit future fiscal flexibility if not addressed.
- The State economic base is somewhat concentrated.
- The revenue base, while diverse, is weighted toward business taxes, and thus more sensitive to secular economic and financial market downturns compared to states that levy sales taxes.
Rating Sensitivities
For Upgrade
- Not applicable.
For Downgrade
- A relaxation of responsible financial management and budgeting practices that causes expenditure demands to consistently outpace revenue growth could contribute to downward rating pressure.
To access rating and relevant documents, click here.