South Dakota’s Upgrade To AAA
A column by Gov. Dennis Daugaard:
We recently received word that Standard & Poor’s has upgraded South Dakota to a AAA credit rating. This is great news for South Dakota. By moving from AA+ to AAA, we join a very exclusive group of states to which Standard and Poor’s has given its highest credit rating.
It took a lot of effort for our state to earn this upgrade. The Lieutenant Governor and Chief Financial Officer met three times with S&P officials, in Pierre and in New York, to discuss South Dakota’s credit rating. Following their first meeting in 2012, we adopted a number of new financial practices, including the release of more financial information to the public and a new debt policy, to accompany the voters’ approval of a balanced budget amendment to our state constitution.
In large part, our new AAA status is the result of our budgetary practices. In 2011 we balanced the budget without raising taxes or spending reserve funds. Each year thereafter, we’ve continued that stewardship by projecting our revenues and expenses with caution, so if we err, we err on the side of a surplus not a deficit. A year ago, after receiving an unexpected windfall, we used the money to retire bonds early and to pay cash for our new veterans’ home rather than borrowing.
These practices along with the state’s fully funded pension system and lack of liabilities led S&P to award South Dakota the highest credit rating.
This upgrade is not just a symbolic victory for South Dakota. There are tangible benefits of having a AAA credit rating. Although our constitution prohibits debt, the South Dakota Building Authority and South Dakota Health and Educational Facilities Authority borrow to finance public construction projects like state park projects and public university projects. The upgrade of our bond rating will not only give the financial markets affirmation of our state’s exceptional credit worthiness, but also save substantial amounts in future interest payments. That means our AAA rating will bring savings for universities, state parks and, ultimately, taxpayers.
As the nation and some states have experienced downgrades, the AAA rating South Dakota has received from S&P is an indication that we’re on the right track. We don’t spend money we don’t have. We keep our budget in structural balance. We are frugal and seize opportunities to spend in the short term where it can lead to savings, efficiencies or better government in the long term.
We work hard to keep our state on a firm financial footing, and this is just the latest example of how that stewardship is paying dividends.