Governor Mark R. Warner announced last week that Virginia retained its optimal AAA bond rating, a development Warner is using to make a case for the passage of the General Obligation Bond.
Moody's, Standard & Poor's and Fitch, three major bond rating firms, declared Virginia worthy of the best possible credit rating in spite of the state's budget problems.
A state's bond rating affects the interest rates it receives when issuing bonds.
The AAA bond rating "is not just a status symbol; it has real meaning because the state gets to borrow money at the most favorable rate," Politics Prof. Larry J. Sabato said.
Virginia faces a more than $1.5 billion budget deficit, which caused Warner to announce additional cuts to most state agencies in a speech yesterday evening. Warner also announced layoffs of 1,837 state workers outside of higher education and layoffs to as many as 4,500 workers within higher education.
Despite these problems, credit raters viewed the state government as fiscally sound because of its current efforts to tackle the growing challenges.
"Our expectation is that the state is going to make whatever cuts or revenue enhancements are needed," said Kenneth Gear, director of the Washington, D.C., office of Standard and Poor's' Local and Regional Government Group.
In particular, Gear said credit raters anticipated the cuts Warner announced yesterday, and this helped allay some concerns about the state's financial status.
In his speech last night, Warner said he was "gratified" that Virginia had retained its AAA ranking.
"These financial experts commended our pro-active, yet conservative, approach for dealing with our revenue shortfall," Warner said.
Warner's spokeswoman Ellen Qualls said communication between Warner and credit raters helped maintain Virginia's rating.
"Our perception is that we've kept them in the loop," Qualls said.
This fall, Virginia's state government is asking voters for permission to borrow money, in the form of the issuance of bonds.
These referendums, known as General Obligation Bonds, will determine whether the state can issue $900 million in bonds for higher education and $119 million in bonds for parks and natural areas.
The University stands to gain $68.3 million for building projects and renovations if voters approve the higher education bond.
Supporters of the higher education bond, such as Warner, are using the announcement of the AAA rating to make the case for passing the referendum.
"The AAA rating enables us to get the best possible rate for borrowing, which helps us sell the bond to voters," Qualls said.
Recently Virginia issued bonds with a 3.3 percent interest rate, and the state can expect similarly low rates on new state bonds if the referendum passes, Qualls said.
The national average credit rating for states is AA, Gear said.
Virginia has had a AAA rating for as long as she can remember, according to Qualls.
Read More
Will Ryan’s resignation impact the University’s reaccreditation?
By Leigh Bailey | 7 hours agoDr. Janea Johnson, public relations and data specialist at SACSCOC, said in a written statement to The Cavalier Daily July 28 that “a change in leadership does not automatically become a compliance concern.”
United Healthcare takes over as student health insurance provider
By Lauren Seeliger | 12 hours agoAll University students are required to be medically insured, but the University student plan is only required for students who do not have other, valid health insurance.
University community leaders gather at the Rotunda to speak about interim President Mahoney
By Xander Tilock | 17 hours agoEach speaker addressed concerns over a lack of input from students, faculty, staff and community members in the circumstances which led to former University President Jim Ryan’s resignation and the decision-making process since then.
