Minnesota Credit Enhancement Program Outlooks Revised To Negative After State GO Outlook Revision
CHICAGO (S&P Global Ratings) Aug. 3, 2020--S&P Global Ratings revised the outlook to negative from stable on various bonds issued under the Minnesota School District Credit Enhancement Program and the Minnesota Credit Enhancement Program for cities and counties. These ratings move in tandem with the state general obligation (GO) rating.
"The outlook revisions reflect the recent outlook change on Minnesota's GO debt (to 'AAA/Negative') based on our view that the state will likely significantly rely on one-time measures and reserves, rather than structural adjustments, to address the 2020-2021 biennium budget gap," said S&P Global Ratings credit analyst Cora Bruemmer.
We rate the bonds in the programs on par with our GO rating on the State of Minnesota, reflecting the state's commitment to pay debt service on behalf of a program participant (school district, city, or county) from its general fund if the participant fails to meet its debt service obligations for the qualified debt. Payments from the state represent obligations for the qualified debt. Payments from the state also represent a standing appropriation that does not require further action by the legislature, although a legislative action could repeal the standing appropriation. Furthermore, the standing appropriation is not subject to executive unallotment authority. We view this standing appropriation pledge as equivalent to a general fund pledge because the standing appropriation does not require adoption of a budget or any action of the legislature to make payment. In addition, the credit enhancement programs support projects that are central to Minnesota's operations and purpose. In our opinion, there is no unusual political, timing, or administrative risk related to the debt payment.
(For more information on Minnesota's GO debt, please see the media release titled "Minnesota GO Debt Outlook To Negative On Its Potential Reliance On One-Time Measures To Address Most Of Its Budget Gap" (published Aug. 3, 2020, on RatingsDirect). For more information on the credit enhancement program ratings, see "Various 'AA+' Bond Ratings Issued Under The Minnesota Credit Enhancement Programs Affirmed After Criteria Review" (published May 10, 2018).
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| Primary Credit Analyst: | Cora Bruemmer, Chicago + 1 (312) 233 7099; cora.bruemmer@spglobal.com |
| Secondary Contact: | Ladunni M Okolo, Farmers Branch (1) 212-438-1208; ladunni.okolo@spglobal.com |
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