Eye on Lansing Snyder upbeat after meetings on Mich. bond rating Rosier economic outlook and fiscal restraints may prompt reassessment

By Kathy Barks Hoffman

Associated Press

LANSING, Mich. (AP) -- Gov. Rick Snyder said Tuesday that his meetings with bond rating agencies in New York should have analysts seeing Michigan in a new light, although he doesn't expect them to raise the state's ratings straight away.

Speaking to The Associated Press in an exclusive interview, Snyder said he was able to talk with analysts on Monday about the state's growing economy and how state government has moved away from one-time budget fixes.

"The tax reform, the budget reforms, these are big deals," Snyder said during an interview in his Lansing office. "We still have a lot to do ... (but) we've gotten a lot done."

Snyder thinks the state's rosier economic outlook -- it's adding jobs in 2011 for the first time in 11 years -- and the fiscal restraints imposed in the budget that starts Oct. 1 will cause Standard & Poor's, Moody's and Fitch to reassess. A higher rating would save the state money because it would be cheaper for school districts to borrow for new buildings and for the state to borrow for new construction projects, potentially saving millions of dollars a year in interest.

The governor doesn't expect his trip to have immediate results.

"The bond market is not a fast-moving market. It moves in a very measured pace -- not in dog years," he said, referring to his push to move quickly on changes he said will put Michigan on a sounder financial footing. "Part of it is starting that dialogue so it starts moving back up. All of the indicators are, if we continue on a positive path we should have a good opportunity to have that happen."

He added: "It will take some time."

Michigan still has investment-grade bond ratings from the three agencies: AA- from Fitch and S&P, and an Aa2 rating from Moody's. That's two steps from the top of Moody's scale, and three from a top AAA rating at S&P. The state lost its top AAA bond rating from Standard and Poor's in 2003.

Bond analysts have said it will take time for Michigan to move up, even with an improving financial picture.

State budget director John Nixon, who accompanied Snyder and state Treasurer Andy Dillon to Monday's meetings, said he's positive Michigan will rejoin the states with top credit ratings. He said many of the budget approaches used by the most credit-worthy states, such as Utah, Indiana and North Carolina, are being used in Michigan.

Under the $47.4 billion 2011-12 budget, for instance, Michigan is putting $255 million into its rainy day fund and $280 million toward what it owes for future health care costs for state government retirees. It also has eliminated one-time fixes to fill shortfalls while cutting spending to be more in line with revenues.

"Yesterday was the first opportunity to present where we are to the rating agencies," Nixon told The Associated Press. "They were very impressed we put some money into our rainy day fund" and toward future health care costs.

Dillon said Snyder, who made similar presentations to equity analysts when he was an executive at computer maker Gateway Inc., knows what the ratings agencies are looking for and how to present Michigan in the best possible light.

"It's not like we're painting a whole new picture of Michigan for these folks," said Dillon, a former House speaker and business turnaround specialist. "But there's some ... fundamental things that have happened. That's the part I appreciated getting to share with them."

Michigan now is seeing its tax revenues increase as the economy improves and residents spend more. It's also seeing business investments grow in the state.

"That's the stuff that they (analysts) can't touch and feel or see from reading the New York Times or the Wall Street Journal," Dillon said. "They understand our trend, they understand our plan, our vision, so that hopefully in a year or two down the road, you're seeing our credit rating bump up."

Snyder said he invited the rating agency analysts to visit Michigan and see for themselves how far the state has come in a relatively short time. No date was set, but they seemed interested, he said, adding that he'd like to show them Detroit and Grand Rapids to point out "some of our success stories."

Published: Thu, Jun 16, 2011

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