KBRA Affirms AA+ Rating on the State of New York General Obligation Bonds; Outlook Stable
12 Dec 2025 | New York
KBRA affirms the long-term rating of AA+ on the State of New York General Obligation Bonds. The Outlook is Stable.
The rating reflects New York State’s diversified economic base; enhanced principal reserves and solid liquidity; manageable fixed costs; and well-funded pension system. A robust statutory and legal framework governs financial management and debt practices. The State’s full faith and credit is pledged to the payment of debt service on its General Obligation (“G.O.”) Bonds.
The rating also considers the State’s growing structural budget gap, driven by rising Medicaid and school aid spending; its concentrated reliance on economically volatile PIT receipts; challenges relating to recent Federal legislation and policies, including Federal spending reductions; and projected increases in already high levels of outstanding indebtedness.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Broad statewide resource base contributes to economic resiliency.
- Demonstrated record of closing budget gaps using a combination of spending restraint and offsetting budgetary actions.
- Manageably low fixed cost burden enhances financial flexibility.
Credit Challenges
- PIT receipts - about two-thirds of State tax revenues - depend heavily on labor market strength, taxpayer migration and capital gains tied to financial sector performance.
- Medicaid spending growth is projected to continue to outpace available resources.
- H.R.1 is projected to increase State costs over the financial plan period, exacerbating out-year budgetary gaps.
- The State’s high cost and tax structure may contribute to population and business outmigration.
Rating Sensitivities
For Upgrade
- Trend of stable to increasing state tax receipts indicative of economic resiliency and growth in the State resource base.
- Continued adherence to spending caps and progress towards achieving long-term structural balance.
For Downgrade
- Failure of the Governor and Legislature to act, when and if necessary, to maintain budgetary balance.
- Significant depletion of reserves to fund operations, reliance on non-recurring revenues to maintain budgetary balance, or the use of deficit financing.
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