In light of Standard & Poor’s recent downgradeof America’s credit rating from AAA to AA+, Republicans in Florida are trying to draw a contrast with President Barack Obama by claiming — or at least passing along the news — that Florida’s credit rating has been upgraded.
Florida Gov. Rick Scott made the declaration Aug. 11, 2011, in an interview with Panama City radio station WFLA 94.5
“Our credit rating went up since I’ve been in office,” he said. “And their credit rating (the federal government’s) is dropping because they’re not doing what we’re doing in Florida. We are the most fiscal responsible state in the country.”
We’ve seen similar claims pop up repeatedly in the past few days. For example:
• Adam Hasner, a former state House member and a candidate for U.S. Senate, tweeted, “S&P’s upgrade of FL’s credit proves balanced budget is first step towards fiscal solvency.”
The link takes people to an interview between Scott and CNBC host Larry Kudlow. “While the U.S. had its own debt downgraded, the Sunshine State of Florida (got) upgraded by S&P,” Kudlow said before introducing Scott.
Did Florida’s credit rating go up, while the United States’ credit rating went down?
Standard & Poor’s is a New York-based ratings agency that studies the financial markets. It issues guidance to investors and rates various investments for financial risk. That includes investments in public debt, such as bonds issued by the state of Florida.
S&P spokesman Olayinka Fadahunsi told us that Florida has held S&P’s AAA rating since February 2005. That means the agency considers Florida to have “extremely strong capacity to meet financial commitments.”
It’s also the highest rating the agency gives.
So how could Florida’s rating have been upgraded?
It wasn’t, Fadahunsi said.
Here’s what happened: In January 2009, the agency changed its outlook on Florida debt. An “outlook” is an evaluation of the likely direction of a rating over six months to two years. In 2009, S&P’s outlook on Florida’s rating dropped from “stable,” which means that a rating isn’t likely to change, to “negative,” which means that a rating may be lowered.
In July 2011, as the United States was having its rating issues, things reversed course in Florida. S&P revised its outlook for Florida from negative back to stable (registration required to see report)based on the latest budget passed by the GOP-controlled Legislature and signed by Gov. Rick Scott.
“The outlook revision reflects our view of the progress the state has made in addressing its structural imbalance through significant cost-cutting measures adopted in fiscal 2012 and maintenance of strong reserves,” said Standard & Poor’s credit analyst John Sugden-Castillo.
The outlook change did not affect Florida’s AAA rating.
We also asked S&P spokesman Fadahunsi whether the agency considers a change in outlook a credit “upgrade.”
“We don’t consider outlook changes upgrades or downgrades,” he said.
State Chief Financial Officer Jeff Atwater put it best in an Aug. 9, 2011, interview with the St. Petersburg Times. “Florida was AAA before the downgrade, it’s AAA today, and in fact the rating agencies just upgraded our longer term outlook,” Atwater said.
Part of the problem with this myth is that the media has at times perpetuated it. On Aug. 16, for instance, the Wall Street Journal published an opinion piece headlined “Upgrading the States.”
“Ohio and Florida get plenty of attention as Presidential election swing states, but this year they deserve notice for another reason. While Uncle Sam was having its debt downgraded, Ohio and Florida both got upgrades from Standard & Poor’s in July as a result of their improved fiscal management.”
After more detail about Ohio, it added:
“Ditto for Florida, which won a AAA rating after closing a budget hole with what S&P said were ‘significant cost-cutting measures’ and making a commitment to maintaining strong reserves. Governor Rick Scott’s 2012 budget was praised for ‘significant measures’ to address its budget deficit and for being ‘proactive in reducing expenditures to adjust for revenue shortfalls.'”
We also found this Aug. 16 report from WOKV radio in Jacksonville. “While the United States credit rating with Standard & Poor’s may have been downgraded recently, Florida’s jumped from AA+ to AAA.”
The WOKV report quotes Atwater as seemingly acknowledging the ratings upgrade. “We went through, got lower pricing, because a triple A bond rating can give us that. In this marketplace, there aren’t many of us out there who have that rating,” Atwater said, according to the report.
But CFO spokeswoman Alexis Lambert said the report misinterpreted Atwater. “The CFO was discussing Standard & Poor’s revised outlook for Florida from negative to stable and the state’s ability to refinance bonds in the current market conditions,” Lambert told us.
To recap: Florida’s credit rating was upgraded to AAA in 2005 while Jeb Bush was governor. Its rating has been the same ever since. The only thing that changed is S&P’s outlook on Florida debt. It went from stable to negative, then back to stable. But that isn’t considered an upgrade, the ratings agency says.
(We should note that Brian Hughes, a spokesman for the Republican Party of Florida, corrected his tweet about the credit rating. “Correction: S&P made positive change to the outlook of FL’s credit worthiness, not the rating.”)
Standard & Poor’s did react favorably to Florida’s budget behavior this year. Both the S&P press release and a longer report we reviewed from the July outlook change spoke highly of Florida’s fiscal strategy, especially its willingness to cut spending as revenue dropped. But it’s not accurate to say Florida’s credit rating went up, so we rule Scott’s statement False.