Montana's Strong Reserves And Low Debt Burden Support Its 'AA' GO Debt Rating, S&P Report Says

Montana's 'AA' general obligation (GO) debt rating reflects our opinion of the state's strong economic growth and financial performance in fiscals 2004-2007, historical willingness to respond to weakened revenues with expenditure cuts and new revenue-generating measures, and continued very low debt burden, according to a report published today by Standard & Poor's Ratings Services.


"In our opinion, despite currently softer revenue performance and projections of lower reserve levels, the state is likely to maintain good reserve levels given its history of budgetary conservatism and willingness to make necessary expenditure reductions," said Standard & Poor's credit analyst Paul Dyson. "In addition, the state's economy has been spared the brunt of the national economic downturn, and sources indicate the state will be one of the first in the U.S. to return to peak employment."

Montana's general fund revenues increased by nearly 10% annually to $1.95 billion in 2008 from $1.13 billion in 2002, then declined 11% to an estimated $1.74 billion in 2009. The state recorded five consecutive general fund surpluses totaling $521 million during fiscals 2003-2007. The fiscal 2008 unreserved fund balance fell to $433 million, or 23% of expenditures, and according to state officials is estimated at $383 million, or 22% of expenditures, for fiscal 2009. In perspective, the 2009 biennium budget had a projected ending available fund balance of $125 million, and more current state estimates pegged it at $180 million. However, the state's fund balance performance comfortably exceeded both, totaling $383 million, due to strong revenue growth and successful reversions of appropriations of more than $90 million.

Montana's unemployment rate has consistently been less volatile than and below that of the U.S. and was 6.4% as of October 2009 -- the fourth lowest among the 50 states. Seasonally adjusted payroll employment has lost only 9,600 jobs since December 2007, which makes the state the seventh best for payroll job growth since the recession began. Moreover, according to IHS Global Insight, Montana will return to peak employment during 2010-2011, one of only a few states to rebound that quickly. The state actually added 6,500 jobs in July and August 2009, and year-over-year job losses of just 0.7% put the state fourth lowest in the nation.

Montana is the fourth-largest state in area in the U.S. and has a population of 979,480 as of 2009, up 8% since 2000. Montana's economy is dominated by tourism, agriculture, and mining; lumber and recreation are the major sources of income in the western part of the state, and agriculture in the east. Montana's GO debt totals a very low $183 million, or a very low $187 per capita and 0.6% of personal income.

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