Gov. Mike Rounds says state government has received high marks for financial strength in new reports from Moody's Investors Service and Fitch Ratings, two of the world's most respected and widely used sources for independent credit ratings, financial research and risk analysis.
"South Dakota in recent years has built a record of strong financial performance and it has maintained general-fund balances better than most other states during a period of extreme fiscal difficulty," Moody's determined.
The complimentary report from Moody's came as the firm issued a favorable "Aa2" rating on $12.5 million in bonds to be sold next week to finance expansion of Western Dakota Technical Institute in Rapid City.
"This outside review is evidence that state government is acting responsibly during this national recession," Gov. Rounds said. "Moody's is recognized worldwide for being conservative when it comes to bond ratings, and this new report is clear evidence that the state's finances are sound. That doesn't mean we don't face challenges, but they are challenges we can overcome."
Fitch Ratings assigned an "AA" rating to the bonds.
"The state's financial profile is healthy, guided by a requirement to start and end the fiscal year with a balanced budget," Fitch noted.
Fitch Ratings added that state government reserves in South Dakota are "firm" and the state unemployment rate of 4.5 percent in August was the second lowest in the nation.
The favorable bond ratings from Moody's and Fitch reflect the financial strength of the South Dakota economy and mean that the bonds will sell at more favorable interest rates for the state.
The Moody's report indicates the following about South Dakota state government finances:
n Record of strong fund balances maintained during a recessionary period of revenue stress
n Very low debt burden and well-funded pension system
n Better positioned than most other states to transition away from federal stimulus funds
"South Dakota's debt burden has stayed low, reflecting conservative financial management as well as constitutional debt limits," Moody's adds.
"The state's net tax-supported debt ranks 47th, both as a percentage of personal income and on a per-capita basis."
The Moody's report says South Dakota has a history of conservative fiscal management, but it questions the state's limited flexibility in raising taxes -- which requires a two-thirds vote of the Legislature.
Gov. Rounds does not look at that requirement as detrimental.
"South Dakotans don't want higher taxes, and I don't see anything wrong with requiring a two-thirds vote to do that," he said. "Although Moody's views it as a financial impediment when it comes to paying off bonds, I believe it's good government and in the best interests of taxpayers."
Gov. Rounds says the state has balanced the current budget without using reserves, which are slightly higher than they were in 2003. Selected spending cuts were also made, and taxes were not increased this year, the Governor noted.