The financial services company, Standard & Poor’s, has determined that no action will be taken at this time to lower the State of Alaska’s fiscal rating.
The response from Standard & Poor’s was published Monday and is based on the report unveiled to the Alaska Legislature by state Attorney General Craig Richards last week.
Richards’ report outlined several sustainable options for lawmakers to address Alaska’s $3.1 billion structural deficit, including the state managing its total revenues and the Permanent Fund as one sovereign wealth fund.
Using the $46 billion that is in that permanent fund to defend the state against oil price volatility also demands change in the formula used to provide Alaskans with annual checks from oil royalties.
Standard & Poor’s reported that they estimate those two reforms “could reduce the structural deficit by 65%”.
The agency reported that the plan comes at just the right time however, further spending cuts and other revenues may be needed to fully close the fiscal gap. There are also risks with the sovereign wealth fund model if investments under-perform the state’s assumptions.
Governor Bill Walker responded today in a statement saying, “I am pleased in the positive feedback provided by Standard & Poor’s and the credit rating agency’s acknowledgement of our proactive approach to begin closing the state’s $3.5 billion budget deficit. It is critical to preserve our AAA bond rating to ensure the state can maximize its return on investments, especially as we diligently work to develop a gasline project. During these tough fiscal times, we must all pull together. I agree with Standard & Poor’s that time is of the essence, and we must act soon to preserve our quality of life for future generations.”