In a new review of Alaska’s state finances, a New York-based credit rating agency has upgraded its outlook for the 49th state.
Kroll Bond Rating Agency LLC announced Feb. 25 that it was upgrading Alaska’s general-obligation debt rating to AA+, one notch below the firm’s top AAA rating. That upgrade could lead to lower interest payments on state debt.
The new rating came as the state prepares to refinance debt associated with the Goose Creek Correctional Center’s construction.
Alaska’s first rating with Kroll was in 2023, when the firm rated Alaska as “AA,” slightly below the new rating. Kroll uses a 10-step scale, with pluses or minuses to indicate whether a rating is near the top or low end of a particular step.
“To secure a rating increase of AA+ is a significant achievement and a big win for our state,” said Revenue Commissioner Adam Crum in a written statement. “We have been very active in the bond markets over the last two years and Alaska’s paper has a scarcity value and a lot of investors want to get their hands on our bonds. The favorable rating has continued to yield positive results and will enable the state to obtain favorable interest rates in future bond deals.”
Alaska’s credit rating has been on an upward trajectory since the oil-price crash of the mid-2010s lowered its rating, and the state has a low level of general-obligation debt — borrowing that’s typically used to fund infrastructure projects.
Historically, the State Bond Committee, which approves the timing and amount of state bond sales, has followed a policy that Alaska should spend no more than 5% of its general-purpose budget on debt service. That policy was revised to 4% in 2019.
The state currently spends about 1.1% of its general-purpose revenue on debt service for general-obligation bonds, down from 6.1% in 2017.
Kroll’s rating is slightly higher than the ratings offered by other global firms. S&P, which raised Alaska’s rating last year, has given Alaska an AA rating, the second-highest on a 10-point scale. That’s up from a prior AA- rating.
The credit rating firm Fitch affirmed an “A+” rating for Alaska last year, slightly lower than S&P and Kroll, but Fitch said it had a “positive” outlook for the state, indicating that its rating could rise. Moody’s, another rating firm, has Alaska at its fourth-highest rating level, but like Fitch, raised its outlook for the state to “positive” last year.
Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.
