Alaska Legislature

Credit rating firm warns of possible trouble for Alaska boroughs if governor’s budget passes

JUNEAU — A new analysis by the national credit rating firm Fitch Ratings says Alaska’s municipal governments could see their ratings drop if Gov. Mike Dunleavy’s proposed state budget becomes law.

A lower credit rating would make it more expensive for local governments to borrow money, creating costs that would be passed to local taxpayers.

The analysis, dated Wednesday and obtained by the Daily News from a legislative staffer, says the governor’s budget could have “significant negative impacts on local municipalities’ credit quality throughout the state if enacted.”

According to the analysis, the governor’s proposed school budget cuts “could stress the budgets of Fitch-rated boroughs" as local governments are required to take on more school construction debt and possibly increase their local funding for schools to make up a loss of state funding.

In addition, the analysis cautions that the government sector is the No. 1 or No. 2 employer in many Alaska boroughs, and layoffs would cause economic problems.

The analysis also examines the governor’s proposal to divert local petroleum property tax revenue from local governments to the state, and declares it is unlikely to pass the Legislature.

If it does pass, the analysis says, the North Slope Borough is prepared to sue the state to block the change.

The report ends by saying that a separate report will examine the effects of the governor’s budget on the state’s credit rating. A prior report examined the governor’s constitutional amendments.

Andrew Ward, a director at Fitch Ratings, said by phone that Wednesday’s analysis is from an unpublished first draft circulated to the company’s clients in Alaska. He said that to a non-technical reader, the draft is not substantively different from the final document, and that final version will likely be published soon.

James Brooks

James Brooks was a Juneau-based reporter for the ADN from 2018 to May 2022.