Moody's downgrades Minnesota to negative

Categories: Politics
minnesota state capitol wiki.JPG
Wikipedia
Thanks, a lot guys -- now our credit's screwed.
To get a state budget passed, Minnesota used a bit of tricky accounting -- a lot of borrowing here, a lot of delayed payments there -- to make the numbers work on paper. The tricks didn't fool Moody's Investor Service, the premiere credit rating agency which downgraded the state's rating from "stable" to "negative."

In other words, the same people who thought everything was swell just before the housing and credit crisis think Minnesota's in trouble. Gulp.

In a statement yesterday, Minnesota Management & Budget Commissioner Jim Schowalter blamed the short-sighted budget deal.

"Sooner or later, we need to fix the state's budget so that it does not rely on one-time solutions," Schowalter said.

Moody's is one of the three major credit rating agencies. Standard & Poor's, a powerhouse rating agency with a similar share of world markets to Moody's, still rates Minnesota Triple-A, its highest rating.

dayton signs bill.JPG
Dayton said no one was happy with the budget, and he was right.
Fitch Ratings, the smallest of the "Big Three" rating agencies, downgraded Minnesota from Triple-A to AA+, which doesn't really sound that bad, in early July. That Fitch did so in the heart of the government shutdown is pretty bad; that Moody's waited, took a look at the budget deal and still downgraded the state's credit rating is even worse.

The last time the state got its credit rating downgraded, it took 15 years to get it back to normal, according to the MMB.

To fix the $1.4 billion budget deficit, the legislature bumped a $700 million payment to the state's public schools, and dipped in to $700 million in leftover settlement money from the state's lawsuit against tobacco companies in the late 1990s.

In his letter reluctantly agreeing to end the shutdown, Dayton said that he wanted the state's services to resume, but warned Republicans that their "plan achieves this goal, not by permanent sources of funding, but rather by borrowing an additional $1.4 billion."

That warning is exactly why Moody's downgraded the state's rating. Moody's analyst Kimberly Lyons told the Star Tribune that the state's unwillingness to either raise taxes or cut spending "makes Minnesota an outlier."


Previously:

Mark Dayton is going to be so pissed when he goes to Freecreditreport.com.


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6 comments
Kirk the Conservative Jerk
Kirk the Conservative Jerk

Wait one minute, the dems and the media all said the MNState budget was cut.  (one big lie, and I will teach you why) If you actually "Cut", you would improve your "creditworthiness", and spur the investors willingness to borrow you money or buy your bonds.  But if you do as the Feds are doing, (borrow more money to continue reckless spending) the investor will shy away due to a downgrade in creditworthiness. (ability to pay back money)

If you want to know more about governmental fiscal policies, Google this -"baseline budgeting"Baseline Budgeting essentially entails the government to get a 5-10% increase in spendingability year after year.How many of you get to do that in your personal lives?On top of that the CBO (congressional budget office) will rate a budget that does not increase at the 5-10% automatic rate as a "cut" or a "savings".  The word they use depends on political intent.There is NEVER a "cut" in the overall discretionary budget.  The rating office just calls it that, whether it be a State or the Fed. (REMEMBER the words "cut" and "savings" are always an political accounting trick)

Here in Minnesota, we decided to find another credit card.  We used a school shift in funds and took a loan from future “tobacco lawsuit funds”.

OF COURSE WE GOT DOWNGRADED!!!!

We are financially f**ked people.  I hate to say it, but if we don’t cut 20-30% from EVERYTHING on the federal level, we're screwed as a nation.

I would love to call our current and past administrations "drunken sailors", but that would be unfair to "drunken sailors".  When a sailor spends all his money while drunk, he/she has the common sense to STOP SPENDING.  You don't raise the debt ceiling, and essentially get yourself another credit card.   That is insanity! But hey, that's Government!

Zeroisanumber
Zeroisanumber

"If you actually "Cut", you would improve your "creditworthiness", and spur the investors willingness to borrow you money or buy your bonds."

Actually, if you're really interested in selling bonds to investors, cutting your creditworthiness isn't a bad way to go. Pimco didn't sell their US positions because they thought that we were a bad risk, they sold them because our credit was so good that our 10-year bonds were only returning 2%. If our rating dropped, and the return got better, then we'd actually sell a hell of a lot more bonds. Of course, we'd get screwed in other ways, but when have conservatives been anything but short-sighted?

And "cutscutscutscuts" will fuck us long-term as our education and infrastructure systems collapse around our ears. But, hey, who cares about that as long as you never get a dimes worth of tax increases, right?

Kirk the Conservative Jerk
Kirk the Conservative Jerk

Your right, not bonds but Treasuries will become less desirable.  But in order to cover the increased interest rate of the bonds when they come due, you have to fudge numbers and borrow more.   And with a sovereign downgrade, our forgiven Debt to capital ratio will have to decrease. 

And "cutcutcutcuts?"  What cuts?  This president has increased the discretionary spending by 71% since his inauguration in 2009 .   Minnesota K-12 funding has increased by more than 40% in the past decade.  Under the leadership of Tim Pawlenty, we increased Minnesota's overall discretionary spending by 30%.  But all we hear is Cut Cut Cut.The K-12 education budget, on a federal level, has exploded in a similar fashion.   But all we here is Cut Cut Cut. 

How much is enough.What is the point of working 70-80 hours a week, if by doing so you're a evil greedy rich person that need to be taxed.   What is the point of going to a school like Harvard?Why would anyone want to become a surgeon or a lawyer or a business owner? What would be the point?

And Zero-"but when have conservatives been anything but short-sighted?"

You mean like the spend today, and figure how to pay for it tomorrow policies of the typical liberal democrat?

And Zero-"as long as you never get a dimes worth of tax increases"

You seem, to forget.  Obama and the Democrats Will be allowing the Obama tax cuts to expire this year.  Everyones taxes will be going up!

You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone this year -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%

Ya that means if you make under $8,300 or so your tax rate will jump from 10% to 15% (thats a 50% increase)  Funny I never heard any disingenuous Democrat ever tell anyone that Bush cut taxes for the poor. 

And hope you dont enjoy the "mortgage interest deduction". The Democrats intend to kill that also.

And hope you don't enjoy the "itemized deductions"The Democrats intend to phase that out also.

Has no one been listening?

Zeroisanumber
Zeroisanumber

""Minnesota K-12 funding has increased by more than 40% in the past decade. The K-12 education budget, on a federal level, has exploded in a similar fashion."

Yeah, no shit. It's almost like we had a population increase, a need to add a shitload of new equipment, and wage increases for skilled professionals. Will wonders never cease?

"How much is enough?"

When programs are funded and working.

"What is the point of working 70-80 hours a week, if by doing so you're a evil greedy rich person that need to be taxed?"

Begging the question.

"What is the point of going to a school like Harvard?"

Something something... way more likely to get rich. Something something... access to contacts amongst the business and political elite of the country. Something something... become one of those elites that Kirk rants about.

"Why would anyone want to become a surgeon or a lawyer or a business owner?"

Surgeons are surgeons because they can't be anything but surgeons. It's like being a poet, but with better wages.

A lawyer, because you hope that by being a serf for ten years you can become a master for 20.

A business owner because once you work for yourself, you never go back.

"What would be the point?"

Whatever the point, I doubt that any of those people will quit and run off to the woods to talk about Ayn Rand and the Gold Standard if taxes get hiked 5%.

vitajex
vitajex

"one big lie, and I will teach you why"

Actually, the big lie is the second part of this sentence.

Zeroisanumber
Zeroisanumber

Unfortunate, but not surprising. If all we're willing to do is cook the books and deal in cowardly, partisan non-solutions, then our credit-worthiness is most definitely negative.

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