The outlook for Alaska’s credit rating has worsened from stable to negative, according to Moody’s Investors Services.
The announcement on Thursday doesn’t change the state’s credit rating, but Moody’s said there’s now increased pressure to downgrade the rating in the next year or two.
Moody’s analyst Edward Hampton said that with the focus on full permanent fund dividends, the goal of balancing the budget has moved to the back burner.
“It sort of created some risks and doubt about other issues,” Hampton said of the PFD. “For example, what is the state’s plan to regain something that looks like structural balance over the long term?”
Hampton emphasized that Moody’s isn’t advocating for any particular dividend level.
If the state’s credit rating were to be downgraded, it would raise the interest rate for the government to borrow money.
Alaska Revenue Commissioner Bruce Tangeman noted that Moody’s used the phrase “political paralysis” twice in a two-page report. He says what they’re doing is a shot across the bow.
“[They’re] just basically saying, ‘You know, it’s time for everybody to do their job and get their work done,'” he said.
Tangeman said he’s disappointed Moody’s mentioned the proposal for full dividends, adding that Gov. Mike Dunleavy’s proposal follows a formula in state law.
House members cited the report on Friday in arguing for a bill that would limit dividends to $1,600, rather than the full amount under the formula of roughly $3,000.
Even with Dunleavy’s vetoes, state spending on the operating budget and PFDs combined would increase by $363 million this year, if dividends are funded at the full amount.
