Texas Insider Report: AUSTIN Texas Texas has once again received the highest credit ratings for this years Texas Tax and Revenue Anticipation Notes (TRAN) which will allow the state to manage cash-flow needs for fiscal 2019.
I am proud that once again Texas has received the highest short-term credit ratings on these notes" Texas Comptroller Glenn Hegar said. Additionally the ratings agencies maintain Texas AAA long-term credit ratings reflecting the highest possible level of creditworthiness. Our diversified economy rising employment and solid revenue growth coupled with Texas history of sound fiscal management and responsible cash-flow projections contribute to these ratings which are crucial tools to reduce borrowing costs and save taxpayer dollars. These are the result of conservative economic leadership and sound policies."
Texas 2018 TRAN issuance is rated SP-1 by Standard & Poors (S&P) F1 by Fitch Inc. MIG 1 by Moodys Investors Service and K1 by Kroll Bond Rating Agency.
This years $7.2 billion TRAN sale is Aug. 22. These annual one-year notes are sold to help fund school payments and manage cash flow between the start of the fiscal year and the arrival of tax revenue later in the year.
The ratings come on the heels of the Comptrollers recent revision to the Certification Revenue Estimate (CRE) by $2.67 billion which several firms cited as a sign of the states robust economic growth over the past 12 months. It was the first time a Comptroller has ordered a revision to the estimate for a reason other than a legislative session in three decades fulfilling a promise Hegar had made to keep legislators and the public aware when the revenue outlook changes significantly.
S&P said We believe the state comptrollers office has developed conservative cash-flow projections consistent with the states strong financial management policies and practices." And S&P noted the states robust economic growth" and sizable rainy day fund" as key elements of its rating.
Fitch cited solid economic and fiscal trends and steadily rising employment and revenue collections while stating The fiscal 2019 forecast assumes continued economic momentum with trade technology and other services driving gains alongside renewed growth in energy-related activity."
Moodys Investors Service noted Texas credit rating reflects strong balances forecasted to be available to repay the notes when due including robust alternate liquidity that the state comptroller can divert to noteholders if necessary."
Kroll stated The economy of Texas is very strong based on an increasingly broad and diverse employment base ongoing robust population growth and above average growth in gross state product. While the oil and gas industry is still a significant part of the economy and fluctuations in oil and gas market prices impact employment and economic activity in the State as well as State revenues we believe that the States economy has diversified and expanded well beyond its past reliance on this sector."
Several agencies also noted potential risks to the states economy and echoed warnings Comptroller Hegar delivered to lawmakers regarding the dangers posed by ongoing trade tensions and lingering balance-sheet issues.
Kroll commented Though current economic indicators remain positive the State economy is also potentially subject to risks posed by changes in federal trade policy particularly as it impacts U.S. participation in the North American Free Trade Agreement (NAFTA)."
Similarly S&P noted While Texas growing prosperity is not likely to abate within the short term emerging trade tensions could have a pronounced effect on the state. As the countrys leading exporter Texas economic industries are strongly intertwined with global supply chains and ancillary business services which support local economies."
S&P also reminded investors that the state will wrestle with how to fund agency expenditures related to Hurricane Harvey recovery and cleanup efforts as well as other policy areas requiring supplemental appropriations including Medicaid."
To avoid potential risks to the health of the states finances and to maintain its triple-A credit rating Hegar has recommended a more prudent and fiscally responsible approach to managing the states $11 billion Economic Stabilization Fund the rainy day fund." Hegar has pushed for the creation of a Texas Legacy Fund a permanent endowment for the state that would earn investment income to begin paying down Texas long-term obligations and safeguard the states savings account against future economic fluctuations.
For more information about the TRAN sale go to trantexas.com.
