Moody’s and Standard and Poors joined Fitch Ratings in assigning a blue chip ‘AAA’ rating to state of Delaware general obligation bonds as well as $2.1 billion in outstanding bonds.
This came despite speculation that the rating was endangered by job cuts at DuPont Co. The 1,700 jobs lost represent less than one-half of one percent of the Delaware workforce and probably less once retirements are considered.
Moody’s had earlier issued a note of caution, due to the DuPont cuts, but maintained the AAA rating as well as a stable outlook.
“Delaware’s stable outlook is supported by its strong structural governance features (including frequent revenue forecast revisions) that will keep the state in a strong position relative to peers through future economic cycles,” Moody’s stated.
Moody’s did state that an “economic contraction that hurts Delaware more than other states” could affect the rating.
Delaware is the 45th-largest state by population and 42nd-largest by state gross domestic product. Per capita personal income was 101 percent of the US level as of 2014.
“Delaware’s conservative fiscal management and longstanding constitutional protections are designed to ensure surplus operations. The budgetary reserve fund (BRF) was fully funded in fiscal 2015 at 5 percent of revenue. Additional cash balances strengthen the state’s fiscal position. Finances of the state benefit from its position as the legal home of most U.S. corporations,” Moody’s stated.
A generally stable economic base and sound pension funding were also cited as positive factors in the rating, Fitch reported
Negative factors were an above average debt burden, although Fitch noted that Delaware handles services that in other states would be under the supervision of counties and cities. Services include public health and local highways.
Job growth has also accelerated, although the rate in the state slowed in late 2015.
“While the loss of employment at DuPont is a negative for the state’s economy, Fitch expects the loss to be softened by continued growth in other employers,” Fitch reported.
The state’s unemployment rate is running near the national average, due to growth in the labor force.
In looking at state finances, Fitch stated that Strong financial results in fiscal 2015 were fueled by growth in personal income taxes ( up 5.4% year over year) as well as growth in corporate income taxes (up 164.2 percent year over year.
Additional information is available at ‘www.fitchratings.com‘.
