Alaska wins upgrade from Moody’s

A growing rainy-day fund helped Alaska win a Moody’s Ratings upgrade Tuesday.

The state’s issuer and general obligation bond ratings were lifted to Aa2 from Aa3. “The upgrade reflects the legislature’s record of restraint on appropriating for citizen dividends from the Alaska Permanent Fund’s Earnings Reserve Account,” the rating agency said. “This restraint has allowed the state to rebuild its rainy-day fund, the Constitutional Budget Reserve Fund, to almost $2.9 billion in April 2025, from $914.5 million at the end of fiscal 2022.”

Moody’s also raised the state’s lease appropriation debt to Aa3 from Aa1, and Alaska Municipal Bond Bank bonds to Aa3 from Aa1.

The rating review came ahead of the bond bank’s plans to issue $170 million of GO and refunding bonds, which will be rated Aa3.

“Revenue alternatives for Alaska are somewhat constrained by the state’s small and less-diversified economy, although progress on major new Alaska North Slope developments bolsters both the economic outlook and the state’s long-term oil production trajectory,” the rating agency said. “Recent retirement benefit liability reductions have been driven by higher interest rates, strong contributions, and the state’s 2006 closure of defined benefits plans, which together have significantly improved Alaska’s leverage characteristics and resulted in a low fixed-cost burden.”

The outlook, previously positive, is now stable at the new, higher rating.

Moody’s had lifted the outlook to positive in April 2024, when the state won an S&P Global Ratings upgrade to AA, where the rating remains. 

KBRA upgraded Alaska to AA-plus in February. It assigns a stable outlook. Fitch Ratings rates the state A-plus with a positive outlook.