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N.D. gets AAA credit rating

North Dakota now enjoys AAA credit rating, the highest available from Standard & Poor's, a global rating agency, but don't expect the state to enjoy the direct financial benefit of that anytime soon.

North Dakota now enjoys AAA credit rating, the highest available from Standard & Poor's, a global rating agency, but don't expect the state to enjoy the direct financial benefit of that anytime soon.

Pam Sharp, director of the state's Office of Management and Budget, said the state could expect to enjoy very low interest rates should it borrow money.

Except the governor and the Legislature have agreed that the state should spend cash if it has cash rather than borrow, an agreement that would last until the next legislative session in 2015, she said.

With the state's oil wealth, it has plenty of cash on hand.

Still, Sharp said, "we are so excited." The top rating shows that North Dakota's economy is strong and its budgeting process is strong, she said. "It's a good overall indication we're a well-run state."

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Standard & Poor's released its new ratings Friday. Besides upgrading North Dakota's overall credit rating to AAA, it also upgraded the state's appropriation debt to AA+, the second highest rating, and the moral obligation debt to AA.

The top rating is enjoyed by only 14 other states. Minnesota and South Dakota are AA+, the former downgraded from AAA in 2011 because of its budget crisis.

The ratings agency said it gave North Dakota an upgrade because of its strong financial position, strong economy driven primarily by oil, low debt and low liability for retirement benefits for state employees.

"In our view, North Dakota's stability throughout economic cycles has long been a positive credit factor, and performance through the recent recession was stronger than nearly all state peers," the S&P ratings report said.

The state ended the last fiscal year with $2.91 billion in the general fund, an increase of $1.5 billion.

The report said that while the state has also increased its spending significantly from $4.24 billion in the 2011-2013 biennium to $6.86 billion in the 2013-2015 biennium, much of that is one-time spending on infrastructure. If oil production were to decline -- and Standard & Poor's believe the state's projections are conservative -- the state can cut spending quickly.

The outlook for North Dakota is "stable," the report said, but there is a potential for "significant reductions in federal funding that currently flows to the state."

On the Web: To read the S&P report, go to GrandForksHerald.com.

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Call Tran at (701) 780-1248; (800) 477-6572, ext. 1248; or send email to ttran@gfherald.com .

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