S&P raises New Hampshire GOs on economic, demographic growth

S&P Global Ratings on Monday raised New Hampshire’s $661.5 million of outstanding general obligation bonds to AA-plus from AA. S&P also raised the state’s $200 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan with the U.S. Department of Transportation.

The outlook on all ratings is stable.

“The upgrades incorporate our view of New Hampshire’s improved economic and demographic growth trends that continue to perform near or above those of the U.S. and regional peers,” said S&P credit analyst Thomas Zemetis.

He added the rating was also based on “our view of the state’s demonstrated commitment to controlling expenditure growth, preserving revenue stability, and building higher reserve balances across recent economic cycles that we believe position it to sustain financial stability in the current and future biennial budgets.”

Additionally, S&P assigned an AA-plus rating to the state’s $60 million of Series 2024A GO capital improvement bonds, selling competitively April 4. Proceeds will be used to finance various state capital improvement projects.

New Hampshire’s full faith and credit is pledged and secures the Series 2024A bonds and all outstanding GO debt; the state’s GO pledge and its pledge of 4.2 cents of the state’s gas tax secure the TIFIA loan.

“The long-term rating reflects our view of New Hampshire’s diverse economy and favorable population growth that have outpaced those of most regional peers and more closely align with the nation, enabling the state to generate strong revenue collections and achieve large financial surpluses,” S&P said in its report.

“It also reflects our view of the state’s emphasis on structural balance in recent biennial budgets and its commitment to building very strong unassigned balances and deposits to its revenue stabilization reserve account, which we expect will extend beyond the current biennium and more readily prepare the state to manage future economic slowdowns or potential revenue pressures,” S&P said.

While the state’s economic growth conditions could potentially slow from recent trends, its credit quality is also underpinned by active budget monitoring and responsive expenditure management that help the state identify and close potential structural gaps swiftly,” S&P said.

“The stable outlook reflects our expectation that New Hampshire’s responsive management and its ability to make timely adjustments to spending and service levels to maintain structurally balance budgets will continue over the outlook horizon, while it also demonstrates a firm commitment to maintaining reserve levels that more readily address evolving economic or fiscal conditions,” according to S&P.

On Monday, Moody’s Ratings assigned an Aa1 rating to the state’s $60 million of Series 2024A GO and maintained the Aa1 rating on the state’s outstanding GOs. The outlook is stable, Moody’s said.

“The Aa1 issuer rating reflects New Hampshire’s strong economic fundamentals including high resident incomes and a diverse economy as well as manageable leverage from debt, pension and OPEB liabilities,” according to Moody’s.

“Given a conservative budget and stronger-than-forecast revenue growth, fund balances will likely continue to grow through fiscal 2025, even as the state eliminates one of its key taxes at the end of 2024,” Moody’s said. “New Hampshire has strong legal flexibility to raise revenues and cut expenditures, although a limited tax structure compared with other states places practical restrictions on this authority.”

The GO rating is the same as the state’s Aa1 issuer rating, given the state’s pledge of its full faith and credit and broad revenue base to pay the bonds, Moody’s said.

“New Hampshire’s outlook is stable as reserves will likely remain above the state’s historic average given conservative budgeting and leverage will remain stable,” Moody’s said.

Also Monday, Fitch Ratings assigned an AA-plus rating to the Series 2024A GOs. The rating outlook is stable, Fitch said.

Fitch said the AA-plus ratings on the state’s issuer, GO and GO TIFIAs “reflect New Hampshire’s low liabilities and strong budgetary controls, which are offset by somewhat limited financial resilience and growth prospects from a taxation regime that does not fully capture economic growth.”