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Ohio’s credit outlook upgraded by Standard & Poor’s
By Peter Krouse, The Plain Dealer
Saturday, July 16, 2011 

Standard & Poor’s Ratings Services upgraded Ohio’s credit outlook on Friday, a forecast that bodes well for the economically challenged state’s future borrowing needs. 

S&P kept the state’s rating at AA+, but improved the outlook from negative to stable. 

The change means S&P expects Ohio to be a better credit risk going forward, said Kasich spokesman Rob Nichols, and if the state’s rating is eventually upgraded to AAA, the highest rating, that should mean lower costs of borrowing and a savings to taxpayers. 

The upgrade reflects progress made in restoring structural balance to the state’s budget through 2013, as well as a “modest economic recovery underway” that allowed for a contribution to the state’s rainy day fund that is set aside for fiscal emergencies, according to a announcement posted on S&P’s Web site. 

Gov. John Kasich reveled in the announcement. 

“This is great news for Ohio,” the governor said in a prepared statement. “Standard & Poor’s decision to improve Ohio’s credit outlook for the first time in two years is a real show of confidence in the positive things we’re doing. It’s encouraging that our accomplishments are beginning to move the needle like this and be noticed by independent financial analysts like those at Standard & Poor’s.” 

The S&P report states that since Ohio’s economy was hit hard by the recession, it “is steadily recovering.” It cites an unemployment rate that fell from 11 percent in March of 2010 to 8.6 percent in May. 

“Positive employment trends have contributed to income and consumer spending growth, which has positively affected revenues,” according to the report. 

But the prospects of a slow economic recovery could mean continued pressure on the state’s budget, the report stated. 

‘AA’ rating means “Very strong capacity to meet financial commitments,” according to the Standard & Poor’s website. Only AAA is higher. S&P sometimes adds a plus or a minus to a rating “to show relative standing” in certain rating categories, according the website. 

Also on Friday, S&P assigned AA+ rating to $416.75 million in Ohio general obligation refunding bonds. Fitch Ratings, another credit rating agency, gave the same bond issue its AA+ rating, the second highest that it offers, while affirming the AA+ rating on $7.6 billion of the state’s outstanding general obligation bonds and the AA rating on $2.4 billion of appropriations-backed state bonds. 

Fitch called the Ohio economy “broad and diverse,” but that it remains exposed to a disproportionately large manufacturing sector. 

Read it at the Cleveland Plain Dealer

 



 
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