Moody's, the Wall Street ratings service, upgraded the state of Florida's general bond rating Wednesday, a change that is expected to lower debt costs by millions of dollars for years to come.
Praising Florida's better-than-average financial and economic performance during the recent recession and its billions of dollars in reserves, Moody upgraded Florida to a Aa1 rating, just one step shy of Moody's highest AAA rating.
"Florida has a history of conservative fiscal management and that has helped them," Moody's analyst Caroline Cruise said Wednesday.
"The state kept balances throughout the recession and that was contrary to what a lot of states did."
To maintain the rating, however, Moody's warned the state must rein in the spiraling cost of Medicaid and find a dedicated funding source for the voter mandate to shrink school class sizes.
Gov. Jeb Bush, in a hastily called news conference to celebrate the news, contended Moody's decision was a wholesale endorsement of his lean-government philosophy, acceptance of Florida's lack of a broad tax base _ and validation of his plans to push for additional tax cuts and an overhaul of Medicaid in the upcoming legislative session.
"Those strategies have impressed Moody's and made it possible to receive this beneficial upgrade," Bush said, as he was flanked by a half-dozen Republican state lawmakers.
"I am really proud of that. I know that really annoys liberals, but so what? It helps us sustain our economic growth and it's the reason we lead the nation in job growth. . . . We have cut taxes," the governor said.
When he rolls out his 2005-06 budget proposal next week, Bush is expected to recommend further cutting the state's tax on investments and giving a tax break to manufacturers and research firms on equipment purchases.
Key Democrats joined Bush in celebrating the news of lower borrowing costs, but they balked at the notion that Moody's was endorsing Bush's economic policies.
"It's a stretch to say that state tax policy has an impact on job growth. There's no proof," said Rep. Dan Gelber, D-Miami Beach, who contends Florida has lost high-paying jobs only to replace them with lower-paying ones in recent years.
During Bush's administration, lawmakers have cut taxes by $10.7-billion, even as a recession shrank state revenues, forcing sometimes-painful budget cuts. Bush says those tax cuts stimulated the economy, spurring job growth and recovery after the Sept. 11 terrorist attacks.
Democratic leaders, however, believe the human and long-term costs have been too high. Medicaid clients, for example, no longer have access to preventive dental services. And community colleges, at the height of the recession, had to turn students away.
"How can it be hunky-dory when we're sitting around talking about a funding crisis for Medicaid?" Senate Minority Leader Les Miller, D-Tampa, said Wednesday. "The state of Florida may look good financially, but when it comes to looking at what we have to dole out, it's hurting us."
Wednesday's upgrade is the best Moody's rating for Florida in 31 years.
State officials said they expect the new rating will lower the interest rate for future debt by 5 basis points, equaling about $10-million in savings over the life of a loan for every $1-billion borrowed. Florida averages about $1.5-billion in new debt annually.
It also will provide a small windfall for the state's biggest investors, including financial firms such as AIG, State Farm and Allstate and anyone owning shares in a Florida tax-exempt bond fund.
Florida joins 10 other states with a Aa1 rating. Six states enjoy Moody's highest rating of AAA, including Georgia and South Carolina.
Joni James can be reached at (850) 224-7263 or jjamessptimes.com.