The third bond rating agency in a year announced Tuesday it would be downgrading West Virginia's rating, from AA1 to AA2.
West Virginia’s Revenue Secretary Dave Hardy announced the decision during a press conference at the Capitol with Gov. Jim Justice.
“This just makes me sick," Justice said after the announcement. "I mean, that’s just all there is to it."
Hardy explained while the change in rating isn’t drastic, it does impact $392 million in outstanding state debt and will affect any bond proposals the state puts forward in the future.
In April and then September of 2016, the two other major national rating agencies- Standard and Poor’s and Fitch- downgraded West Virginia based on budgetary issues and the state’s lagging economy. At the time, Moody’s put West Virginia on watch, but made the decision to downgrade Tuesday morning.
“The downgrade reflects, according to Moody’s, a multi-year trend of growing structural imbalance between the annual expenditures and available resources in our state’s budget,” Hardy said.
That means the state is spending more money than it’s bringing in, leaving a budget gap lawmakers have had to fill over the past several sessions.
This year, the Governor’s Office estimates that hole is $497 million and will continue to grow without a solution.
“We’ve been years and we won’t react," Justice said. "All we want to do is kick the can down the road and we won’t react, and it’s just going to get worse. It’s just going to get worse if we won’t react and we won’t do something.”
Justice wants to raise taxes to fix the imbalance, but Republican Legislative leaders so far are largely against his proposals. They’d rather rely on substantial cuts to government and refinancing the state’s pension debt, lowering the current payment, but extending the length of the debt far into the future.
It’s that proposal, though, that Justice said contributed to the Moody’s decision.
“Moody’s said, if you do that, you’re even more unstable. If you don’t make current liabilities, if you don’t make current payments, you are even more unstable,” he said.
Aside from refinancing pension debt and the state’s massive budget hole, Moody’s says West Virginia will also continue to be downgraded if it doesn’t find a way to create long-term growth and diversify its economy.
In a written statement Tuesday evening, House Speaker Tim Armstead said the downgrade “reinforces the need for fundamental changes to the operation of state government.”
He will continue to support proposals to restructure the state’s tax code and “right size” government, or make additional cuts.
Justice did not take questions from from reporters following his statements.