ST. PAUL, Minn. (AP) — Minnesota saw one of its three main credit ratings slip on Thursday over budget problems that have led to the state's week-old government shutdown.
Fitch Ratings downgraded the state's bond rating a notch from AAA to AA+, citing the government interruption and "an increasingly contentious budgeting environment."
Minnesota is the nation's only current state to shut down government after political leaders failed to reach a budget deal before the new budget cycle started. A lower credit rating will make it more expensive for the state to borrow money, and could also increase borrowing costs for cities, counties and school districts.
Democratic Gov. Mark Dayton and Republican legislative leaders remain far from resolving their differences over spending and taxes, and had no planned meetings to discuss the overall budget on Thursday, though they participated in a meeting focused on school finances and policy.
"While negotiations continue, it is impossible to know at this point when a budget agreement will be reached or the shape that the final agreement will take," Fitch's analysts wrote. "However, it appears likely that the outcome will continue the use of non-recurring balancing tools and that deferred payment obligations will continue to be a drag on the state's finances."
Dayton's top finance adviser, Management and Budget Commissioner Jim Schowalter, said the downgrade shows that the state's credit reputation is suffering from years of temporary budget patches that have left the state with structural deficits.
"In the eyes of the marketplace, we are slipping," Schowalter said.
Minnesota has the second-highest rating from Moody's Investors Service and the highest rating from Standard & Poor's. Moody's analysts released a comment two days before the shutdown began saying the state has vowed to keep paying its debts through the shutdown and made it through a partial shutdown six years ago without a downgrade from Moody's.