Idaho Bond Ratings Save Taxpayers Millions

by Senator Brent Hill

There is a reason why none of the television networks have tapped into the drama of bond rating agencies on Wall Street: the process is complex, arduous, and, by most people’s standards, boring. But the bond rating awarded to the State of Idaho affects every city, county, school district, and citizen in this state.

Last week, Idaho State Treasurer, Ron Crane, asked me to accompany him to New York City for his annual meetings with the nation’s top bond rating agencies. Idaho owes little debt compared to most states. We are fortunate to have a constitution that requires the Legislature to balance the state’s budget every year. While some states are incurring huge amounts of debt to fund ongoing programs, Idaho enjoys economic stability and security against future economic downturns. However, due to the timing of revenues and expenditures within the year—Idaho’s expenditures exceed its revenue collections during the first half of its fiscal year—the state issues Tax Anticipation Bonds. The proceeds from the bonds temporarily fund state agencies and public education in anticipation of tax collections scheduled later in the year.

For two days, we detailed Idaho’s economic outlook to skeptical analysts from Moody’s, Fitch, and Standard & Poor’s. We explained the motivation behind the Legislature’s actions to provide tax relief to individuals and businesses. In an economy where states across the nation are seeing significant revenue under-performance and growing budget shortfalls, we described Idaho’s strong economic performance based on consistent tax policy, fiscal restraint, and a business-friendly environment. We reported that Idaho has almost $400 million in reserve funds to weather future economic crises. (See illustration below.)

The results: Idaho received the highest bond rating available from all three rating agencies! Idaho bonds are in such high demand that when the $600 million worth of bonds went on the market this week, there were orders from investors of over nine times that amount (over $5.5 billion). Obviously, the bonds were sold within minutes for a very favorable rate to the State of only 1.72%.

Idaho’s superior bond rating means more than knowing our state is well-managed and financially sound. It means Idaho’s bonds can be issued at lower interest rates—saving the state treasury millions in interest charges. Even more significant is the fact that the credit of all other public entities in Idaho benefits from the state’s high bond rating. Bonds issued by our school districts, cities, counties, Idaho Building Authority, Idaho Housing and Finance, and other public entities all enjoy reduced interest rates because they link to the state’s rating.

Idaho is in good hands. Our conscientious administration and effective Legislature have made Idaho one of the economically strongest states in America. That is something we have always known, but it is nice to have America’s experts declare it as well.