The outlook on Alaska’s credit rating was changed to negative by Moody’s Investors Service as slumping crude oil prices cut into the state’s revenue.
The change means the state could see its Aaa credit rating lowered on $840 million of general obligation bonds and $1.16 billion of state-issued debt rated Aa2, Moody’s said. The oil price decline may require the state to spend much of its budget reserve, which had reached $16.3 billion last year, or almost three times the size of its annual spending, Moody’s said.
Home to the nation’s third-largest onshore oil reserve, Alaska gets 90 percent of its operating budget from crude-production taxes and royalties. That leaves the state susceptible to swings in oil prices.
“Just as the state has benefited from high oil prices in recent years, prices well below previous expectations could lead the state to substantially reduce its financial reserves, eroding a key support to its Aaa rating,” Moody’s said in a statement.
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