Alaska Municipal Bond Bank GO 2019 One, Two Bonds Assigned 'AA-' Rating; Other Ratings Affirmed

CHICAGO (S&P Global Ratings) April 2, 2019--S&P Global Ratings assigned its 
'AA-' rating to Alaska Municipal Bond Bank's (AMBB) approximately $32.8 
million in 2005 master resolution general obligation (GO) bonds, series 2019 
One (non-AMT) and Two (taxable). The bond bank is a public corporation of, and 
benefits from certain credit support by, the state of Alaska. The outlook is 
stable.

We also affirmed our 'AA' rating on the state of Alaska's GO debt outstanding, 
our 'AA-' rating on the state's lease appropriation-backed debt, our 'AA-' 
rating on AMBB debt secured through continuing appropriations and a moral 
obligation pledge from the state, and our 'A+' rating on bonds issued by the 
Alaska Energy Authority and backed by a moral obligation pledge from the 
state. The outlook on all ratings is stable.

"The ratings reflect our view of Alaska's countercyclical economy that 
demonstrates above-average unemployment rates compared to the nation and a 
weak demographic profile characterized by an increasing aging population and 
overall population declines," said S&P Global Ratings credit analyst Timothy 
Little. Other factors include our opinion of the state's:
  • Economic and budgetary dependence on oil-related revenues that pressure the state's ability maintain budgetary balance, while the governor's proposed 2020 budget reduced appropriations by 25% compared to the prior year to close an estimated $1.6 billion deficit that would return a $3,000 statutory divided to residents;
  • Demonstrated ability to reduce its operating budget, reduce the Permanent Fund (PF) dividend from its statutory amount, and formalize use of its significant investment earnings as unrestricted general fund revenues to partially mitigate its structural budget deficit over the past five years;
  • Proposed measures by the governor for voter approval of new or increased revenues, restrictive expenditure caps, and protecting the state's Permanent Fund (PF) dividend payment to residents with a constitutional amendment that, if adopted, may limit budgetary flexibility and slightly weaken our view of revenue structure flexibility in the state's fiscal policy framework;
  • Very strong reserve position of between Constitutional Budget Reserve Fund and PF Earnings Reserve Account (ERA) representing over 3x fiscal 2018 audited expenditures; and
  • Strong debt and liability profile characterized by moderate debt levels and adequately funded pension and other postemployment benefit obligations.
The series 2019 One and Two bonds are rated one notch off the state of 
Alaska's general creditworthiness based on a standing appropriation to 
replenish the debt service reserve (DSR) to its required level if there is a 
draw because of a borrower default. Our rating reflects the strength of the 
appropriation pledge and the legislature's demonstrated commitment to include 
the appropriation in the state's annual operating budget. However, the bonds 
are GOs of the AMBB, payable from sources pledged under the 2005 master 
resolution, which assigns borrower payments to the trustee for the repayment 
of the bonds. There has never been a borrower default in the history of the 
program or draw on the DSR.

Series 2019 One and Two proceeds provide new-money loans toward four 
communities and refunding of a portion of the Southeast Alaska Power Agency's 
series 2009 electric revenue refunding bonds.

"The stable outlook reflects Alaska's adopted structural reforms in fiscal 
2019 allowing a planned use of its PF ERA to fund operating expenditures," 
added Mr. Little. Overall, the recognition of a percentage of market value of 
the PF as revenue eases the state's reliance on oil-related revenues and 
reduces its structural deficit. Even with significant use of reserves since 
2015, the state maintains available reserve balances in excess of 3x 
expenditures, which provides rating stability. We do not expect to change our 
rating within the next two years.
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