Giving credit

The dogwoods are leafy green, the cardinals are chirping away, and Virginia’s historic creditworthiness is solidly in tact.

This past week, Moody’s Investors Service issued a statement saying it was removing Virginia from its dubious credit watch list, signaling to bond markets the Old Dominion remains as safe an investment as it’s ever been. The Aaa bond rating the state’s had since 1938 – longer than any other in the union – remains a sign of conservative fiscal policies and a source of Capitol Square cocksureness.

It’s a relief to policymakers and Main Street types alike who for some time have feared a possible one-notch downgrade to an Aa1. Such would’ve meant millions in higher borrowing costs to the state – thus, to taxpayers – and seriously wounded pride. It’d all have suggested that Virginia is no better than North Carolina, who a year or so ago lost its triple-A rating, and not as good as Maryland, another of only seven states who retain one.

Moody’s publicly pegged (and slightly embarrassed) Virginia more than nine months ago for a possible double-A downgrade. Since then, the Wall Street bond-rating agency has been sitting patiently on the sidelines, waiting to see if Gov. Mark Warner, a Democrat, and the Republican-led General Assembly could cooperatively clean up the state’s smudged balance sheet.

A number of things had put Virginia on Moody’s watch list. First, there was the state’s dwindling cash reserve. The Rainy Day Fund had fallen from more than $900 million several years ago to about $200 million this year. Second, Moody’s was tired of watching state budget-writers engage year after year in accounting sleights of hand in order to balance the books. And, third, their analysts were increasingly alarmed by Virginia’s apparent indifference toward properly funding the core services and infrastructure needs of an increasingly sophisticated citizenry and economy. At the root of all these were two issues: the state’s antiquated tax code, which produced insufficient revenue, and the out-of-control cost of the admittedly popular car-tax relief program.

Moody’s obviously concluded that Warner and the legislature rose to the occasion and appropriately addressed the state’s several-years-long financial crisis. The bond-raters cited three reasons for reaffirming Virginia’s triple-A status: a rebounding economy, the recently passed tax-reform and budget package, and the legislature’s work to restrain the runaway annual cost of the state’s car-tax relief program, which at nearly $1 billion is now twice – and was headed toward being three times – its original projections.

“These measures,” said Moody’s, “will restore the state’s structural budget balance and illustrate the strength of the Commonwealth’s long tradition of conservative fiscal management.”

It’s clear to all that Moody’s decision was based on the above three factors. In fact, they declaratively said so.

Yet there are some – legislators and political gadflies alike – who still maintain that the state’s premier bond rating would’ve been reaffirmed due to the rebounding economy alone. They suggest – with foot-stomping, arms-crossed defiance – that the tax-reform and car-tax initiatives were unnecessarily passed and irrelevant to Moody’s decision. Some of these are the same folks who predicted months ago that Moody’s was intent on stripping Virginia’s triple-A rating no matter what the legislature did and, therefore, should’ve done nothing, especially on the tax-reform front.

Obviously, if Moody’s thought the rebounding economy alone was enough reason to remove Virginia from its watch list, they’d simply have said that and would’ve said nothing at all about the tax-reform and budget package or efforts to restrain the car-tax program’s skyrocketing cost.

But politics being what it is, this line of thinking will continue to be thrown out for all who want to grab on to it. And as we gear up for next year’s statewide and legislative elections, it’ll certainly continue being grabbed.

Important now, however, is that policymakers and budget- In the meantime, though, let’s revel in the good news of a rebounding state economy and a reaffirmed triple-A bond rating.

And now that there’s a lot of credit to be given, let’s give it where it’s due.