KBRA Affirms AA+ Rating, Stable Outlook on State of New York General Obligation Bonds
13 Dec 2024 | 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 the State's resilient and diversified economic base, ample liquidity, manageable fixed costs and fully funded pension system. A strong statutory and legal framework supporting financial management and debt policies underpins the rating. Exceptional growth in General Fund tax receipts since FY 2021, the result of Federal stimulus and resurgent economic activity, has allowed the State to significantly expand investments in key initiatives such as MTA operational funding, asylum seeker assistance, health care and public safety programs, and SUNY endowment support, all while growing reserves.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Broad and wealthy 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
- The State is reliant on PIT receipts, which historically comprise almost 2/3 of total tax collections. PIT receipts are economically sensitive, subject to uncertainties relating to remote working and tax migration, and closely correlated to the income of wealthy residents and the performance of the financial sector.
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 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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