S&P: Virginia Public Building Authority's 2016A-D Bonds Assigned 'AA+' Ratings; Virginia 'AAA' GO Debt Rating Affirmed
"The stable outlook reflects the commonwealth's proactive identification of revenue shortfalls and historically demonstrated active budget management to alleviate projected deficits," added Ms. Spain. It also reflects recent measures to increase pension funding and structural improvements in the 2016-2018 biennium budget, although we recognize that recent revenue shortfalls could tip the state into imbalance. In addition, the outlook incorporates the state's strong and diverse economy and unemployment rate that has remained consistently below U. S. levels despite recent deceleration following federal sequestration.
We have viewed the commonwealth's gap-closing measures in the 2014-2016 biennium as predominantly one-time in nature and therefore a weakness, in our view, but we also note that this is partly mitigated by the commonwealth's conservative approach to re-estimating its revenue. Virginia again has identified a budget gap for the current biennium, and it has yet to identify a response. If the commonwealth can't make sufficient adjustments to structurally balance the budget, in our view, this would signify a trend of imbalance and weakened budget management practices, which could negatively pressure the rating. Additionally, if the state chooses to significantly use reserves to address the projected budget gap, we would consider this action out of step with the current economic cycle and a reversal of the commonwealth's past practices of building reserves during periods of economic growth. In our opinion, depleted reserves could weaken its ability to respond to economic and financial downturns and be an indication of weaker credit quality.