JUNEAU — A credit rating agency Monday said the tentative fiscal proposal released by Gov. Bill Walker's administration last week could leave the state's top credit rating intact.
The agency, Standard & Poor's, said in a report that the Walker administration's plan could help Alaska stave off a credit downgrade, which S&P warned of earlier this year. But it added that the proposal to change the way the Permanent Fund operates may not be enough on its own because it would still leave the state with a $1 billion deficit that would have to be closed by cuts, taxes or other measures.
"Nevertheless, in our view, the proposal marks an important step forward for Alaska's fiscal future and arrives not a moment too soon," the report said.
It described the plan for Alaska as "a potential light at the end of its deficit tunnel."
Attorney General Craig Richards presented the Walker administration's proposal last week in briefings for reporters and lawmakers. It aims to convert the Permanent Fund into an endowment-like account to shield the state's budget from swings in the price of oil, which amounts for about three-fourths of Alaska's projected revenue this year.
In a prepared statement, Walker said Monday he was pleased by Standard & Poor's endorsement of the proposal. "I agree with Standard & Poor's that time is of the essence, and we must act soon to preserve our quality of life for future generations," Walker said.
S&P warned in August that it would likely downgrade Alaska's credit rating if lawmakers don't start fixing the state's $3 billion budget deficit within the next year. A downgrade could increase the cost of borrowing for the state, raising interest rates on state-issued bonds. And if the state ends up borrowing money to pay for its share of a proposed $55 billion natural gas pipeline from the North Slope, a lower rating could lead to more than $1 billion in increased interest charges, the Walker administration says.
The plan released by the Walker administration last week would eliminate about two thirds of the budget deficit. It is not yet a formal proposal, and would need to be approved by the Legislature.