NEW YORK – S&P Global Ratings announced Thursday that it has placed Minnesota’s credit rating on a warning list due to the budget fight between Gov. Mark Dayton and the Republican led legislature.
The state has a AA+ credit rating, and S&P has placed that rating on what it calls “CreditWatch with negative implications.”
The governor’s line-item veto of funding for the House and Senate begins on July 1. That funding includes $8 million annually in bond payments on the new Senate office building.
“The CreditWatch placement reflects our view of the governor’s use of his line-item veto authority, during approval of Minnesota’s $46 billion 2018-2019 biennial budget, to reject appropriations to the Legislature that defunded the Legislature’s budgets,” S&P Global Ratings credit analyst Eden Perry said in a release.
The ratings agency noted that the governor and legislature still has time to come to an agreement. A lease rental payment is not due until November 14, and there is an interest only payment of $1.9 million due in December according to the S&P release.
Senate Majority Leader Paul Gazelka (R-Nisswa) has said the Senate will prioritize paying salaries of legislative staff, and that payments on the office building may suffer as a result.
“If the state works out an agreement and meets its contractual obligation over the next 90 days we would remove the ratings from CreditWatch, but would likely revise the outlook to stable rather than back to positive because this situation has illustrated a departure from what has been very strong budget management and is not commensurate with higher rated credits,” the agency said in its release.
The agency also noted that if the situation is not resolved soon, the state’s credit rating, as well as associated ratings, could be lowered by “several notches.”
Gazelka issued a statement Thursday calling for Dayton to immediately call for a second special session of the legislature this year.
“If he refuses, I’m hopeful the courts will step in soon to declare the governor’s action unconstitutional so the state can continue to pay its obligations and avoid potential negative consequences to our credit rating,” Gazelka wrote in the statement.