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Fitch Ratings agency downgraded Hawaii’s general obligation bonds to AA from AA+, citing the state’s depletion of previously large balances, its long-term liabilities and dependence on the tourism industry.
A lower bond rating can lead to higher borrowing costs, which adds to the taxpayer’s burden.
Fitch said in a news release Wednesday that the state had a positive general and reserve fund balance of $785.8 million in fiscal 2006. That positive balance was mostly gone by fiscal 2009 and had turned negative by 2010, the agency said.
"The state closed the (2009) fiscal year with a negative ending balance of $36.8 million after accounting for an overstatement of certain tax revenues, though $60.4 million remained in the reserve fund and approximately $180 million was available in the separate Hurricane Relief Fund," Fitch said.
"Despite delaying the payment of income tax refunds to be paid in fiscal 2010 into fiscal 2011 and a $57 million draw from the Hurricane Relief Fund, which was not previously expected to be drawn upon, the state ended fiscal 2010 in a negative position," Fitch said.
The agency also noted the state is not contributing as much to fund its pension liability as it did a decade ago.
"Funding levels for Hawaii’s pension system remain a concern, with reported funded ratios having declined from 95 percent in 2000 to 61.4 percent as of June 30, 2010, and the unfunded liability exceeding $7.1 billion," Fitch said.
