AAA Bond Ratings Keep Interest Rates Low, Saving the State Money

ST. PAUL, Minn.: This week, the state of Minnesota sold $1.6 billion in general obligation bonds. Money generated from the sale will support programs and capital improvements as well as refinance existing debt for economic savings.

“The money raised from the bond sale will help build and maintain assets throughout the state, improving the infrastructure that Minnesotans rely on every day,” said Minnesota Management and Budget (MMB) Commissioner Erin Campbell. “We are grateful that the three major rating agencies recently reaffirmed Minnesota’s AAA credit ratings, which keeps borrowing costs low and helps ensure good stewardship of taxpayer resources.”

Specifics Regarding the Sale

The five series of general obligation bonds sold on Aug. 6 include:

• $879,630,000 General Obligation State Various Purpose Bonds, Series 2024A (3.28% interest)
• $352,750,000 General Obligation State Trunk Highway Bonds, Series 2024B (3.23% interest)
• $29,965,000 General Obligation Taxable State Various Purpose Bonds, Series 2024C (4.08% interest)
• $190,245,000 General Obligation State Various Purpose Refunding Bonds, Series 2024D (2.64% interest)
• $141,165,000 General Obligation State Trunk Highway Refunding Bonds, Series 2024E (2.65% interest)

Kutak Rock LLP served as bond counsel on the transaction.

What the Rating Agencies Said

Last month, Moody’s, Fitch and S&P Global reaffirmed the across-the-board AAA bond ratings, marking the third consecutive year that all three rating agencies gave Minnesota the very top bond rating.

In affirming Minnesota’s AAA rating, Fitch stated, “Minnesota’s ‘AAA’ IDR and GO bond ratings reflect the state's steadily growing and broad-based economy, highly educated workforce, expanding population and a revenue structure well-designed to capture economic growth. The ratings also reflect a low long-term liability burden and historically strong control over revenue and spending that, in conjunction with a sophisticated approach to reserve funding, leaves Minnesota well-positioned to manage through economic cycles while maintaining a high level of financial flexibility.”

In affirming Minnesota’s AAA rating, Moody’s Investors Service stated, “Minnesota’s ‘AAA’ issuer rating reflects the state’s strong reserves and liquidity, low leverage from debt, pension and OPEB liabilities, and diverse and high-income economy. The rating also reflects strong fiscal governance practices and wide financial flexibility.”

In affirming Minnesota’s AAA rating, S&P Global stated, “Minnesota’s ‘AAA’ GO rating reflects our view of the state’s robust financial management and government framework, its demonstrated commitment to structural budgetary balance and to maintaining healthy reserves, its above-average economic characteristics, and its conservatively managed debt and liability profile. Given the state’s historically strong financial position and a national economic forecast that points to ongoing, albeit moderating, growth through 2027, we do not expect downside credit risk to materially increase within the two-year rating outlook horizon.”

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