ALBANY, NY—Moody’s Investors Service has praised the New York State budget, adopted last week, calling the spending plan is “credit positive” because it keeps a cap on spending, it was approved on time for the fourth-straight year and it increased school aid.
Neither Standard & Poor’s nor Fitch Ratings have commented on the latest budget. However, late last year both agencies affirmed their the ‘AA’ rating for the state of New York’s general obligation bonds.
“The State of New York (which has an Aa2 positive rating) enacted its third consecutive budget that conforms to the state’s 2% spending cap, a credit positive for the state,” Moody’s says in its most recent report. “Last week’s enactment of the budget also marks the fourth year in a row that the state legislature adopted the budget by the March 31deadline.”
Moody’s has been bullish on New York, and last August the rating agency changed its outlook on the state’s bonds from “stable” to “positive.” A strong bond rating means the state can borrow money at lower interest rates.
Adds Moody’s in its report, “Reflecting chronic legislative dysfunction, the state’s budget was more than 30 days late 14 times from the mid-1970s to 2004, and exceeded the 30-day benchmark in all but one year from 1994 to 2004. Since 2005, state budget adoption exceeded that threshold only in 2010.”
The report credited Gov. Andrew Cuomo for keeping state spending to 2% for the third consecutive year. That’s a stark contract from prior years, Moody’s indicated. From 2004 to 2007, expenditure growth averaged 8.5%, compared with annual personal income growth of 6.8% and inflation of 3%.
Moody’s also praised the $300 million in the budget to finance pre-kindergarten expansion in New York City, saying the money is credit positive for the city.
Overall, the state added $1.1 billion in aid for school districts, and two-thirds of the increase will go to “high need” school districts, which are those with high rates of poverty and low wealth, the report notes.
“The state considers approximately one third of all districts in the state as high need,” continues Moody’s, “and the additional funding will benefit most school districts in the state, especially in the face of a state-imposed 2 percent property tax cap that restricts local revenues.”