The water crisis in Flint and the financial crisis in Detroit Public Schools seem taking a toll on Michigan’s credit outlook.
Standard and Poor’s, one of the three major credit scores firms, changed Michigan’s outlook for basic responsibility debt down a notch, from “favorable” to “stable” this week.
Samp;P is simply one scores agency, and these “outlooks” have the tendency to change fairlya fair bit. However what’s most notable about this particular change are the factors Samp;P cites for it.
The revised outlook reflects our view that rising costs tied to the Flint water crisis and Detroit Public Schools (DPS) distressed monetary position will limit the states capability to develop reserves over the next 2 financial years, stated Standard amp; Poors credit expert Carol Spain in a release.
Samp;P seemed especially concerned that the state will have to dip into its rainy day fund to cover Flint and DPS costs, as it deals with “significant political pressure” to do so.
“Ought to expenses tied to the Flint water crisis or support to distressed local governmentscity governments exceed proposed quantities, Samp;P believes there is strong potential that [rainy day] funds might be tapped,” Spain said.
While Samp;P is concerned about the 2 crises putting a continuous strain on the state spending plan, State Treasurer Nick Khouri recommended Samp;P is “overreacting.”
Khouri stated the state is “disappointed” with Samp;P’s move. He believes the company is “underestimating” the general development of Michigan’s state budget and economy over the last few years.
Gov. Snyder has proposed sending out $195 million to Flint in his next spending plan, with extra money for water facilities upgrades statewide; and another $720 million over seven years for DPS drawn out of the state’s tobacco settlement funds.
“We are persuaded we can meet both our commitments [to Flint and DPS] from available funds, without straining the overall budget plan,” Khouri stated.