By Grant Bosse on July 13, 2010

(CONCORD) The nation’s three largest bond rating agencies have held New Hampshire’s rating steady, while raising warning flags about the state’s deteriorating budget situation and unfunded pension obligations. As New Hampshire prepares to borrow $44 million to make this year’s debt payments, Standard & Poor’s, Moody’s Investor Services, and Fitch Ratings all maintained the state’s above average ratings, both for this bond issue and the state’s long-term outlook.

Standard & Poor’s affirmed the state’s AA/Stable rating based on “the state’s strong income levels and relatively low unemployment, and low debt burden. Moody’s maintained a Aa1 rating because of New Hampshire’s “fundamentally strong state economy that has outperformed the nation during the current downturn” and its “wealthy demographic profile.” Fitch’s rating of AA+ reflected “New Hampshire’s economic strength and resiliency and conservative debt position.”

Warning Signs
But all three agencies included stark warning about the continued use of one-time budget fixes and reliance on speculative sources of money. Standard and Poor’s didn’t like the state’s decision to wipe out the Rainy Day Fund.

“These strengths are somewhat offset in our view by New Hampshire’s:

• Significant decline in reserves for fiscal 2009, which brought the unreserved general fund balance to less than 1% of expenditures; and
• Low pension funding level, which, while currently at 58%, is well below most other states’ pension funding.”

Moody’s summed up New Hampshire’s “Credit Challenges”.

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