S&P Cuts Minnesota’s Last Perfect Credit Rating

ST. PAUL, Minn. (AP) — Minnesota’s last remaining perfect AAA credit rating disappeared on Friday when Standard & Poor’s downgraded the state’s debt, citing lawmakers’ weakness for fixing budget shortfalls with accounting shifts and rainy day funds.

The New York-based agency cut its rating on the state’s bonds to AA+, joining Fitch Ratings and Moody’s Investors Service in giving a less-than-perfect grade to a state long proud of being above average. The downgrade also is likely to lead to higher borrowing costs for the state and local governments including cities and school districts, although the initial increase could be masked by low interest rates. The state is due to sell bonds next week and later this year.

“Unfortunately we are no longer a triple-A state,” Minnesota Management and Budget Commissioner Jim Schowalter said in a statement. “Their assessment confirms what we all know — that we need to fix the state’s budget problems so that we don’t have large and recurring budget deficits.”

Minnesota has been under politically divided government since the mid-1980s and clocked the nation’s longest state government shutdown in at least a decade in July, when Democratic Gov. Mark Dayton and a Republican-controlled Legislature deadlocked over a $5 billion deficit. State leaders eventually agreed to delay school aid payments and sell bonds based on future legal payments from a settlement with tobacco companies to erase that shortfall, after turning to accounting shifts and reserves to erase deficits in recent years.

The political dysfunction led Fitch Ratings to downgrade its perfect credit rating for Minnesota during the 20-day shutdown. Minnesota had lost its perfect rating from Moody’s in 2003, hovering once notch below that since then. The state’s more recent budget problems led Moody’s to lower its outlook for Minnesota’s financial future from “stable” to “negative” in August.

Standard & Poor’s analyst Robin Prunty cited temporary budget fixes — including the delayed aid payments and the bonds based on tobacco settlement money — and diminished reserves as reasons for the downgrade.

“The downgrade reflects what we view as the state’s ongoing reliance on nonrecurring measures to balance its budget, which we believe will contribute to continued structural imbalance,” Prunty said.

Dayton — who gave up on a plan to raise income taxes on the highest earners because of GOP resistance — blamed Republicans for the downgrade.

He called it “very disappointing but not surprising, given the fiscal irresponsibility of the Legislature’s Republican majority. Standard and Poor’s specifically cited the use of one-time measures, which would not have been necessary had my proposed budget been adopted.”

GOP House Speaker Kurt Zellers threw the responsibility back on Dayton for not supporting a Republican plan to erase the deficit through budget cuts alone. He said both parties share responsibility for the budget that became law.

“It wasn’t written in invisible ink,” Zellers said. “He put his signature to it.”

State finance officials met with the rating agencies last week in New York as they prepare to sell $921 million in general obligation bonds next week.

Schowalter said it won’t be easy for the state to regain perfect credit ratings. It took 15 years to regain the top rating the last time the state was downgraded.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

  • homer

    Cause y’all aint nice no mo’.

    • Mike

      Trying to blame our current Gov. for the downgrade is a bit of a stretch when you live in a country where one political party, (Republicans) are willing to bring the economy to the brink of a disaster on a regular basis. Speculatio­n and greed drove the economy off a cliff in 2008, and since nothing has been done to change the fundamenta­l dynamic. Corporatio­ns will not expand to create jobs, but set up shore to evade paying taxes. Republicans define stimulus as a dirty word, and despite the historical implicatio­ns, are willing to cut revenues and spending during a recession. As a country we are willing to borrow to support corrupt government­s in Iraq and Afghanista­n but cannot afford to pave are own roads. Yet, the populous clamors around false hope and ideology, name calling the opposition while the fleecing of their savings and home values fall and deliberate stagnation takes place while they undermine their own existence by voting for those that willingly line their own pockets and those of the wealthy who ambitiously plan to further set us back by stealing our securities into our last years of life. Good luck with all that…………

      • homer

        What’s all that got to do with not bein’ nice no mo’?

  • People of Minnesota

    Thanks Dayton.

  • People with IQ over 80

    Thanks Dayton, thanks liberals, thanks progressives, thanks entitlement mentality, thanks never standing you your own two feet, thanks fraud and finally thank you abuse.

  • dumb

    Good thing TPaw opened up that ER line of credit before he took off. Dayton couldn’t get a dollar donut now. Hey, let’s all buy some state bonds, vote for all the school referendums, and throw in some unions! Taxing the rich didn’t work for ya now and won’t work for ya later.

    • sam i am

      Right the Senate and Hosue had a balanced budget that would have elmininated this but no Dayton had to have more welfare, more entitlements, more programs.

      Gimme gimme gimme, that is the entire liberal mentality.

      • dumb

        Yeah. The libs are funny cats. Get a group of 10 together. One will announce that they lost their job, got unemployment and some housing/food assistance. The group applauds! Another one announces they got a managerial promotion to six figures and, suddenly, that person is a damn traitor! Dumb liberal mentality.

      • Get Real

        If the Senate and House would have presented a budget without the social issues, this would have happened.

  • G Dog

    The real villains?


    Can’t raises on wealthy folks to help balance the budget! For you DFL bashers, all three ratings services cited a lack of additional funds in addition to budgets cuts.

    • dumb

      Because Dayton had to rob different pots to save face. I’ll give “Get Real” an A+ for his comment. That just required sitting down and discussing the fact that stupid tea bag morals don’t belong in a budget. But, you G Dog, must realize that you can’t just keep taking and creating when you can’t pay for what you already have. It’s gotta stop somewhere. If Dayton would have asked to raise taxes to maintain or pay down, he would have had me. To create and exploit. No, he lost me. We all need to live within a budget and this economy requires a budget.

  • Henni

    Go gov, keep cutting those ribbins, handing out money, and not telling everyone that every dollar you accept from the feds costs minnesotans five fold. Just like every other politiacian, kick it down the road. We are going to be in real trouble next year and taxing the rich is not going to get it. Whats your plan?

  • G Dog

    Henni and dumb:

    Hope you love paying more in property taxes as your homes devalue!!!!!!

    Send a thank you note to Glen Taylor, the Pillsburys, the McMillans, the Pohlads, the McKays, the Grundhofers, the Naegles and etc.

    While they suck the life out of government services, I’m sure that you’ll blow the snow out of your own neighborhood instead of relying on “gummitt”.

    By the way, all three bonding service also cited the accounting shifts and other trickery as well as stealing nearly $2.5 billion from public schools as an additional reason for downgrading Minnesota’s bond rating. THAT is Pawlenty’s legacy. Not to mention that 1/3 of the state’s schools are asking their voters to make up for a lack of funding. If that doesn’t tell you something, then you have truly drunk the kool-aid of Tea Bagger idiocy.
    And you defend this? What planet do you live on?

    • dumb

      What are you talking about? Dayton carried on Timmy’s legacy with robbery. Politicians are all power hungry whacks. Somehow, the elected idiots have to the best with what they’ve got. My property taxes went down to reflect lost value. Same on my other property in a different county. The schools always ask for money, what else is new. Ipad anyone? Come back with something better than that. I live on planet Earth.

      • Citizen

        @dumb. Haven’t you heard that the homestead credit was eliminated? Better go take a look at your property taxes and see how much that credit was worth to you. It was stated on the news that the average homeowner’s property taxes will increase by $300 a year. That, plus the schools are holding referendums. This increase in property taxes was predicted because of the GOP “no new taxes” garbage AT THE STATE level. Now local governments and schools have to do the dirty work of raising local taxes to survive. Totally predictable lying by the GOP who knew local taxes would go up.

        • dumb

          Citizen must own a house! Look at your own tax statements before you write out the bull. Over the past few years my tax has decreased according to value by a pretty nice amount. Nothing to cheer about but the decrease is significant. In my case I now pay 1400 less in taxes than when I bought it 5 years ago. The homestead tax, for me is 160. WHOOP—TEE—DOO. Where the county giveth, the state taketh. They did wrong by not making the homestead repeal for ALL homes. Hope they fix that. And good luck with all those referendums.

  • G Dog

    Your handle is appropriate.

    • dumb

      That’s all ya got? dumb.

  • demo-downers

    Democrat=Downgrade. I agree with Dayton on one thing: It’s not surprising.

  • demo-downers

    Gee it’s funny, Ohio’s governor Kasich of just fixed their budget deficit crisis by cutting spending and refusing to gouge the taxpayers by using the old go-to play from the democrat playbook of raising taxes every time they overspend. And lo and behold the S&P just raised their credit rating. Responsible people instinctively know this. When you spend more than you have, the answer isn’t simply to get more money so you can keep spending beyond your means.

    If Dayton was a serious man he could probably keep all of his precious welfare programs by looking for waste and redundancy and eliminating it. You couldn’t swing a dead cat at the Capital and not hit hundreds of millions in pure waste. We could probably afford even some the idiotically stupid ones. But no, he’s not interested in saving Minnesotans hard-earned money.

    When you’re born into a fortune, and have never had to support yourself and live within your means, you simply have no understanding of how or why. In his case I’m sure the answer was whenever he wanted something and didn’t have the cash, he just went to place where you get more money: Mom and Dad. And they give it to you without a fight. For a Democrat the answer is always to just get more cash so they can keep buying whatever they want.

    • Chuckles

      And if you think that replacing good paying, middle class jobs for global scaled wages and undermining the government coffers by tax cuts for business and the wealthy is going to spur the economy than you are a dolt! Without demand and spending in an economy driven by consumers, you have bought into a suspension of reality. Their will be no recovery for building homes or selling the foreclosures which will surely rise when people are not able to afford the home they are in. With out raising wages, we are all doomed and you will see more businesses folding up shop. The one thing Republicans are very good at is causing economic depressions and our current one is their third. Trickle down economics has never worked.

      • demo-downers

        Trickle down poverty sure seems to work fine for Obama. Poverty is way up, along with spending, and the size of government and unemployment. Of course a few things are down. Like our credit rating, which was always perfect until hurricane Obama blew into town, and growth, and consumer confidence, and every other measurable good thing. Not one single thing was worse with Bush, and not one single thing has gotten better under this inept clown and his cronies. And your vaunted tax-the-rich-fair-share mantra just keeps chasing more American jobs overseas, which is something you decry, then cause. Too funny.

        That’s why Obama will lose. He’s Jimmy Carter squared to the tenth power. Go ahead and get all technical about economics and explain how it’s not your fault. Every negative (perceived) thing Bush ever did or whatever happened while he was pres., he got blamed for. Now you get to find out how fun it is to be responsible for EVERYTHING that happens on your watch. Don’t like it? Tough titty. You own it now. Good luck in 2012.

        • Ha!

          Why has Obama embraced Trickle down? Hmmmmm. Because he doesn’t have a clue? I bet that’s it.

  • Citizen

    Most economists are now stating that the U.S. is in exactly the same financial, political, and philosophical situation as right before the Great Depression of the 1930’s. Read what Herbert Hoover used for economic fixes then. Exactly the same GOP financial austerity policies the GOP is pushing now. Those ideas didn’t work in 1930 and won’t work now. Economists are even starting to call this the second Great Depression. Way to go GOP!

    • dumb

      And what has Obama and his government hench-hogs done about it all this time? Created HUGE programs and inadequate stimulus! Oh, and let Ben run wiild.

    • Reality sucks

      Yes, Citizen I recently read an outstanding article that said the 2008 financial “crisis”—that was the warm up. It doesn’t matter who the next POTUS is (seriously, why would anyone want that job?) because we are going to slide DEEP into this “depression” we are already in. Employment is going to sky rocket, entitlements will be reserved for the nearly dead poor and the rest of us are going to freak out when we see the price of typical consumption. We’re riding a bubble (a seriously intricate nasty blanket of bubbles) with an icy cold sea of dead dollar inflation below, and they are going to burst. Expert predictions set the time table for 2013-2016, I think that’s liberal. Reality really does suck. But, the great thing is, people can choose not to believe any of it. America will adjust the best due to our economic structure and a doomsday scenario can be remedied if only slightly. The answer has been there all along. Raise or fix the tax base on all and decrease/eliminate unnecessary spending. The article, unfortunately, listed the many reasons why it’s too late and the correction is inevitable. Of course, we will have to wait and see but the word is out and is being legitimized by all camps.

      • Citizen

        @Reality. Or, or….we could have some real leadership in this country that has the stones to fix the federal tax structure in a realistic way that will raise revenue and not hurt the poor, elderly, disabled, etc. The federal tax code is the problem and the solution. Where have all the leaders gone? The answer is that we don’t have any–just a bunch of squabblers who have agendas that don’t include patriotism and the good of the country. Can you imagine any of them being able to drop the atomic bomb as President Truman did? Or have the guts to raise income taxes to the 94% level on the wealthiest as Eisenhower did? No, they all remind me more of President Hoover and his “hoovervilles” and assault on WWI veterans.

        • Reality sucks

          You know me, I’m not politically charged, there’s enough of that around here. The only stand I can take is that the tea party appears to be the current problem and has to go. You are so right on the rest. I hear the new tent city in NJ is sweet–they have porta-potties. Good god!

          • Citizen

            @Reality. It is always about leadership. Right now the Tea Party is the tail that is wagging the dog. The media reports about the Teas are greatly exaggerated and and at a recent rally fewer than 50 people showed, but mainstream media covers this group like it is all powerful. Gives one pause to wonder why….

            • Reality sucks

              Good to hear! But, that leads to the truth of the matter that our governement is disfunctional at it’s core. I have no idea what will fix this, without spewing out my barbaric desires. A president with brass balls and an unquestionable team of economists— a legislative body laced to their chairs until compromise is determined —would be a start. The corporations letting up on their greed and the consumer given confidence. That’s a lot of barbaric desires! You have a good rest of your day. I have to get back to working on my case.

  • patty

    ThE failure of Japan and European economies after their brisk growth in the early post war years , where they were unable to catch the US in per capita GDP,.their growth having stopped in 1970. The direct link is the burden of taxes. The burden of high taxes and the welfare state it creates is so expensive it just breaks the link between work effort and what you get out of it i.e., your living standard. A lesson for Mr. Dayton…If you want to stimulate growth in investment, productivity, and income, cut taxes on capital.

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