Michigan Wins 2nd "Gold Medal" with Another Wall Street Rating Upgrade to Aaa

Contact: John Truscott (517) 335-6397

Michigan today received its highest credit rating ever from Moody's Investors Service. Moody's upgraded the state to Aaa from Aa1. It is the highest credit rating possible.

Moody's is the second Wall Street ratings agency to take such action. Last week, Michigan became the 10th state in the nation to join the elite ranks of being rated a "Triple A" state by a Wall Street ratings firm when Standard & Poor's (S&P) upgraded the state to AAA.

"I'm heartened by this second Aaa rating - our second 'gold medal,'" said Governor John Engler. "We are extremely pleased and proud that Moody's has recognized the many management and budget control reforms implemented by my administration and the Michigan Legislature."

Michigan has never previously received a Aaa rating from Moody's and actually hit an all-time ratings low of Baa2 in 1982. Since then, Michigan has received more upgrades to its bond rating from Moody's than any other state.

The Aaa rating for the state lowers the cost of state and school borrowing. In the years ahead, this will save millions of dollars for the state and for Michigan schools in the form of lower interest rates. Moody's cited the following reasons for the upgrade:

  • Management and budget control changes that solidified well-established trends in Michigan of a balanced budget, effective management and fiscal flexibility;
  • Strong executive control of significant financial resources, including six consecutive years of strengthening the state 's budget stabilization fund (Rainy Day Fund) and School Aid Fund and maintaining their high levels; the ability to lapse spending; and the ability to delay multi-year works projects;
  • A very low debt burden for a large, mature, industrialized state;
  • A fully funded state pension system;
  • A steady pace of economic growth and diversification;
  • An economy that continues to add jobs while keeping unemployment rates at historic lows;
  • Well-established economic and financial trends that have also accommodated significant tax cuts in recent years;
  • An economy that is less exposed to economic downturns.
A rating upgrade, particularly to Aaa, results in lower interest costs. For instance, the state will soon issue Environmental Quality of Life bonds. Reduced interest costs on these bonds will free up funds for other state priorities.

The Aaa upgrade was given to both the state's general obligation debt and the school bond loan fund. It denotes that these bonds are judged to be of the best quality, offering the smallest degree of investment risk.