Nevada's bond rating is excellent

Despite Nevada's growing budget shortfall, the three national bond rating firms have decided not to downgrade the state's financial rating.

The news last week that the projected state revenue shortfall was now more than $700 million by the end of the biennium had officials at Fitch, Standard and Poors and Moody's worried enough to grill Director of Administration Andrew Clinger and Treasurer Kate Marshall about the state's financial situation.

But in the end, all three decided not to reduce Nevada's rating, which is one of the nation's best. Fitch and Standard and Poors both have Nevada at AA+ while Moody's has the state at an Aa1.

Ratings firms have been closely monitoring the financial situation in all states because of the nation's economic slump. A number of states have had their ratings downgraded. California, by comparison, is rated A+ by Fitch and Standard and Poors and rated A1 by Moody's - all lower than Nevada's rating.

A lowered rating can cost the state hundreds of thousands of dollars when major bond packages - such as for prison or highway construction projects - are sold.

"Basically, if you get downgraded, it's the equivalent of a tax increase," said Marshall. "You pay more to borrow money."

Chief Deputy Treasurer Robin Reedy said the office staff had been planning for the worst as it prepared the two bonds sold this week. She said they were pleasantly surprised not only by keeping the AA+ rating but by the interest rates. UBS Securities won both bonds, bidding 4.48 percent interest for the $10 million open space and parks bonds and 4.59 percent for the $22.5 million parks and natural resources bonds.

That rating is critical because it not only gets the state lower interest rates when it borrows money, but tells investors Nevada bonds are an excellent place to safely put their money.

"We are very pleased we were able to maintain our ratings given the most recent economic news and I think that's the result of the strong financial management of the state," said Reedy.

She said the ratings agencies were also swayed by data from Department of Administration Economist Janet Rogers, which showed that, in past times of economic trouble, Nevada has recovered much more quickly than most other states.

"The numbers actually show where we dipped after 9/11 and in the '80s and it's phenomenal," said Reedy. "We recover much faster."

Marshall said that data helped influence the agencies not to reduce Nevada's ratings.

Of the three agencies, only Fitch put a caution on Nevada's current rating. Senior Deputy Treasurer Mark Winebarger said Fitch put Nevada on a "negative outlook," meaning they will keep an eye on the state's financial situation and review the rating when the next batch of bonds is sold.

"We were very fortunate to only get the negative outlook," said Marshall.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.