S&P upgrades Alaska’s credit outlook to stable because of Permanent Fund Protection Act

Another sign that Alaska’s economy has turned the corner, Governor Walker says

June 13, 2018 ANCHORAGE – Standard & Poor’s Global Ratings upgraded the State of Alaska’s general obligation debt outlook from negative to stable, citing the passage of Senate Bill 26, the Permanent Fund Protection Act.



Governor Bill Walker introduced the legislation, which passed earlier this year with support from Democrats, Republicans, and Independent lawmakers. S.B. 26 limited draws from the Permanent Fund earnings reserve account (ERA) to an amount that is sustainable yet enough to pay $1,600 dividends to Alaskans. The Permanent Fund Protection Act, along with spending cuts, reduced Alaska’s structural budget deficit by 80 percent, and reduced state government’s reliance on oil revenue.



“It is our opinion the adopted legislation that outlines a percent of market value approach to use its Permanent Fund earnings reserve account should allow for sustainable draws from the fund in future budgets,” S&P Credit Analyst Timothy Little wrote in a press release.



The outlook revision is the first significant, positive news from one of the major credit rating agencies since Alaska’s fiscal crisis began in 2014. S&P, Moody’s, and Fitch Group all downgraded Alaska’s credit in response to gridlock over how to solve to a budget deficit that peaked at $3.7 billion after oil prices plummeted.



Credit ratings provide independent, objective analysis of the state's credit worthiness. They help investors decide whether to invest in Alaska, and determine how much it will cost for the state to raise money in the capital market.



“This is independent confirmation of something we already knew: Alaska’s economy has turned the corner,” Governor Bill Walker said. “There is still work to do, but I thank every member of the Legislature who took bold action to steer our state back onto a responsible financial path.”