Tuesday, November 5, 2013

Fitch downgrades rating outlook

Haven't had time to read this story, as I just saw it in comments (thank you), but Fitch apparently downgraded its rating outlook for Mississippi to negative:

Fitch Rates $338MM Mississippi GO Bonds 'AA+'; Outlook Revised to Negative

Fitch Ratings assigns an 'AA+' ratings to the following State of Mississippi general obligation (GO) bonds:

-- $179 million GO bonds, series 2013A (taxable);

-- $159.225 million GO bonds, series 2013B.

The bonds are expected to sell via negotiation the week of Nov. 11, 2013.

In addition, Fitch affirms the 'AA+' rating on the state's $3.99 billion in outstanding GO bonds and the 'AA' rating on $201 million of appropriation-backed bonds issued by the Mississippi Development Bank (Dept. of Corrections).

The Rating Outlook is revised to Negative from Stable.


The bonds are general obligations of the state, with its full faith and credit pledged.


OUTLOOK REVISION: The revision in the outlook reflects the state's slow fiscal recovery from the recession and continued reliance on one-time resources to cover recurring needs, in the context of a weak demographic profile and weaker pension funding levels.

CONSERVATIVE FINANCIAL MANAGEMENT: Mississippi's financial management is generally conservative and action to maintain balance amid revenue weakness has been prompt. Stringent budget control mechanisms exist and reserve levels are reduced but remain sound. The 98% budgeting policy, which was suspended through the recession, was reinstated beginning in fiscal 2013; however, the fiscal 2014 budget appropriates a portion of the balance.

MANUFACTURING BASED ECONOMY: The state's socio-economic profile is relatively weak, with wealth and educational attainment indicators that significantly lag national levels. The economy continues to diversify and some successful economic development initiatives should bolster employment in the coming years; however, the manufacturing concentration well exceeds national levels.

HIGH LIABILITIES DUE TO PENSION UNDERFUNDING: Mississippi's debt burden is moderate, but above average, and is largely in the form of GO debt. Unfunded pension liabilities, measured as a percent of personal income, are among the highest of the states.


The rating may be lowered if the state is unable to consistently fund ongoing operations without relying on one-time revenue sources, if there is weakness in the economy that diverges from the national trend, or if funding for pension liabilities weakens.


Mississippi's long-term GO rating of 'AA+' reflects the state's history of conservative financial practices and established reserves in the context of a weak socio-economic profile and high long-term liabilities. The Outlook revision to Negative from Stable reflects the state's slow fiscal recovery and the continued use of one-time revenues to support on-going expenditures despite recent revenue recovery.


The state did suspend its 98% budgeting policy for fiscal years 2008 through 2012, but returned to this historical practice in the fiscal 2013 budget as the economy and associated revenues improved. The gradual draw-down of the Working Cash Stabilization Fund, which had reached a peak funding level of $362 million in fiscal 2008, allowed the state to manage reductions in tax revenue associated with the recession. Of some concern, however, is the state's continued use of balances in the fund for budget balancing purposes given recent strong revenue performance, which could leave the state more vulnerable to future revenue volatility. Although it deposited $188 million of fiscal 2013 surplus into the fund, the enacted fiscal 2014 budget transfers $109 million of the balance, in part to spending for Medicaid. The balance is estimated to be $109.5 million at the end of fiscal 2014, 2.2% of general fund revenues.

After two years of revenue weakness related to the recession, revenues began to rebound in fiscal 2011 and stronger growth continued in both fiscal 2012 and fiscal 2013. To achieve balance, the fiscal 2013 budget included 5.5% cuts to many agencies and used cash balances in several funds. The funds were partially replenished with surpluses generated by the return to the policy of appropriating only 98% of expected revenues and strong revenue performance. Unaudited general fund revenues are reported to have exceeded forecast, growing an estimated 5.1% year-over-year.

Revenue estimating continues to be conservative, with the forecast for the current fiscal year requiring no growth over final estimated prior-year results. The enacted budget depletes the budget contingency fund, which is funded from one-time revenues including a transfer from the working cash stabilization fund. A significant portion of the spending from the budget contingency fund is to finance $187 million in Medicaid expenses, a slightly lower amount from non-recurring sources than in fiscal 2013. While the state is not participating in the expansion of Medicaid associated with implementation of the Affordable Care Act, Medicaid costs are expected to increase in fiscal 2014.


Mississippi's economic and demographic profile is relatively weak. The employment base, when compared nationally, is overweight in the more volatile manufacturing sector. Wealth levels are very low - per capita income is ranked 50th among the states and the poverty rate is the highest among the states.

The state lost jobs in the recession generally in line with the U.S. experience, with employment down 5.3% between 2007 and 2010 compared to a 5.6% loss for the nation. However, the state lagged the U.S. in the recovery and employment growth, which had resumed at a slow pace in mid-2010, reversed by mid-2011. After this second dip, employment began growing on a year-over-year basis in November 2011 and has recently begun to demonstrate some strength. Non-farm employment increased 1.7% in August 2013 following a strong summer, with growth in June and July of 2.4% and 2.3% respectively, higher than the national average. Construction and business and professional services experienced particularly strong employment growth of 13.1% and 9.2% respectively in August.

The unemployment rate has fallen from its peak of 11% in February 2010, but remains above the U.S. rate at 8.5% in August 2013, compared to 7.3% for the U.S. With the state's investment in economic development projects designed to diversify and expand the economy, continued moderate growth is expected.


The state's net tax supported debt of approximately $5.3 billion represents a moderate but above average burden on resources at 5.3% of 2012 personal income. Debt is largely GO and amortization is average, with 58% of outstanding GO debt to be retired in 10 years.

Pension funding continues to decline and the state utilizes a funding methodology that employs a fixed contribution and variation of the amortization period for its unfunded accrued liabilities. Despite having raised employer contributions to 15.75% of payroll and employee contributions to 9% of payroll, the funding of the state's Public Employees' Retirement System declined to 57.7% as of June 30, 2013 and its amortization period increased to 32.2 years. The Fitch-adjusted funded ratio is 51.9%. On a combined basis, the burden of net tax-supported debt and adjusted unfunded pension obligations that are attributable to the state equals 19.4% of 2012 personal income, well above the 7% median for U.S. states rated by Fitch, and amongst the weakest of the states. Fitch notes that the demands of debt and pensions on the state's operating budget continue to be manageable.

The current offerings finance various economic development loans and grants, as well as various capital improvements.

Additional information is available at 'www.fitchratings.com


KaptKangaroo said...

Wow. Bad news. Not really, what have we been talking about here for the past couple of years?

Apparently, we have some with rose colored glasses that continue to deny the sky was yellow and the sun was blue.

Anonymous said...

Fitch just following Tater's suggestion.

Pugnacious said...

So, Shadowfax was wrong and Chicken Little is right..the sky IS falling.

Anonymous said...

The bonds were not downgraded.

I swear the words say AA+ is reaffirmed. The outlook changes from stable to negative. The bonds were not downgraded.

It's not as much fun, when we can't complain. Circle up firing squad

Anonymous said...

Fitch has not read the Secretary of State's rosy forecast for this state, "Mississippi is leading southern states out of the recession"..."we have returned to pre-recession levels here".

I wonder what the tax exemptions total are for Mississippi currently are? In Louisiana where manufacturing is central to their economy too, they given generous tax rebates and exemptions to corporations over the years.

Mississippi has excess capacity in our institutions of higher learning and port facilities to name a couple of big ticket expenditures.

Anonymous said...

This is what happens when you have a corporate-lobbyist governor like Haley Barbour for 8 years, and a couple of federal treasury looters for US Senators like Thad Cochran and Trent Lott, and they loot the billions from DC and send them back to Mississippi to Haley and he doles-out the cash to his cronies and buddies and to his state legislature to use to pay the daily bills of the state, and they all claim great success and fiscal conservatism and balanced budgets, etc.

Imagine how many jobs and how much tax revenue could have been generated on the Coast alone if the $600 billion in DC HUD money going to a failing port would have been used to build housing and create jobs. Now, there are less jobs at the failing port than pre-Katrina, and only a small handful of companies that cozy with Haley are getting all of the money. I could list more examples but it would take days and days and days to do so...

Anonymous said...

The outlook changes from stable to negative. The bonds were not downgraded.

Are you from Detroit? You're using the same misdirection.

Anonymous said...

Outlook is not the same as bond rating. The bond rating effects ALL bonds, not just new issues. The bonds were not downgraded...yeah, i know, it's not as much fun to complain about outlook changing as opposed to rating change. Get a grip, learn to read, and don't be such bandwagon jumper

Anonymous said...

10:14, I see that once again sticking your head in the sand and screaming "it really ain't so, really, no big deal, forget about it", is the prevailing mentality in this state. No big deal for one of the nations 3 biggest rating agencies to associate the two terms "bonds" and "NEGATIVE" with Mississippi, why, everybody in the country already associates the term NEGATIVE with us anyway. Lets all go eat some lunch at Hal and Mals and forget we are breathing today, maybe have a drink of Makers as we honor 'ol Haley and Feel.

Anonymous said...

The problem, Pug-Fish, is that 'Chicken Little' tends to squawk every time it clouds up without checking first with the weatherman.

In this case, even Eric Law knows this system will blow on off to the east. Pounding the fist and squawking 'gubment irresponsibility' does little to solve issues. As to the mention of Cecil The Frown Brown, he's had many years of opportunity to change the system but he was too busy tweaking it to benefit himself.

You can change investment advisors every two days and a ponzi arrangement will still not ease into viability. Change the damned system up for those not within ten years of retirement and the problem will immediately vanish.

The Libertarian said...

Kim Wade seems to be close to the name of the perpetrator but he won't say it on the air....anyone here know who made the flyers? I figure the best people to be vocal about are locals (Tom Head etc) and I'd like to start a campaign against this Alinsky disciple as well.

Anonymous said...

Try to stay on point, Libertarian. Here's a clue for you, just in case you can't: The perp is not now now will he ever be a candidate for office. Campaign away!

Anonymous said...

1:22 I don't think Libertarian means a political campaign; I think he means a community-based "name and shame" campaign.

Anonymous said...

We have had and continue to have duplication at every level and fiefdoms of power.
We pay for studies that aren't needed.
Nothing is co-ordinated and there's little long range planning.
In a poor state with limited resources, fiscal responsibility cannot and efficiency is hard to find.
The phrase " economies of scale" is not understood.
The ability to work together to promote our State is nearly non-existent and any suggestion for change is seen as a criticism of the status quo.

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