WV Bonds Rated High Despite National Downturn of Economy

DOW JONES NEWSWIRES

Moody's Investors Service upgraded its ratings on West Virginia's bonds, citing the state government's fiscal conservatism and consistent fund balances despite economic downturns during the past decade.

The rating agency also pointed out improvement in the funding ratio for West Virginia's pension systems and reduction of its liability for other post-employment benefits, although the state has significant unfunded pension liabilities, especially in the Teachers' Retirement System.

West Virginia is one of a few states that did not have a budget deficit in fiscal 2009. For fiscal 2010, which ended June 30, the state's general fund budget assumed a 3% decline in revenue, and this year's spending plan is flat with a forecasted 2% growth in revenue.

States across the nation have been grappling with multibillion-dollar budget gaps, many caused by employee-benefit costs such as pensions. As such, some states have seen their credit rating lowered.

But Moody's on Friday raised its rating on West Virginia's general-obligation bonds one notch to Aa1, one step below the top rating of Aaa. The outlook is stable. The other two major ratings agencies, Standard & Poor's Ratings Services and Fitch Ratings, have West Virginia one notch below Moody's new grade.

Moody's moved the state's ratings outlook last August to positive, hinting at a possible upgrade, despite its historically underperforming economy, which has resulted in average per capita income levels below other states and slower population growth. Moody's has noted West Virginia's modest growth and diversification away from the coal industry; and the number of employed people fell at half the national rate last year.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; Kathy.Shwiff@dowjones.com