Bond Downgrade Adds to State's Financial Woes
Like Gov. Tomblin, West Virginia Revenue Secretary Bob Kiss said Friday he was not surprised to hear Standard & Poor's had downgraded West Virginia's bond rating from AA to AA minus, but he said there are silver linings to the decision.
One is the renewed emphasis for lawmakers to approve a budget that includes some long term funding solutions for the state. For Kiss, that means revenue increases.
Tomblin and Republican legislative leaders are well into a month of their budget impasse and although Senate President Bill Cole said last week he felt lawmakers were coming closer to an agreement, there is still no word on when a special budget session will be called.
For Kiss, the downgrade of West Virginia's rating shows that the "structural hole" he and Gov. Tomblin have been pointing to must be taken care of now and not temporarily patched this year pushing, a more permanent solution down the road.
"We need to find a way to get out of this hole," Kiss said. "If we continue to live beyond our means we're going to very quickly drain the Rainy Day Funds."
The Rainy Day Fund, or revenue shortfall reserve, is the state's savings account simply put. In recent years, lawmakers have drawn money from the account to balance the budget, but Kiss said if that trend continues, the state could face an even sharper rating downgrade.
But West Virginia is not the only state facing challenges tied to the energy sector. Alaska saw a downgrade earlier this year and Illinois in late 2015.
In West Virginia, the downgraded rating means the interest rate on bonded projects- road construction, school construction, etc.-- is likely to go up, and that increase won't just be seen on statewide projects. Kiss said counties and municipalities piggy back off of the state rating for their own projects.
"They will have to pay more for interest costs so it has an effect," Kiss said.