KBRA assigns a long-term rating of AA with a Stable Outlook to the State of Alaska's General Obligation Bonds. The rating reflects the fundamental strength of the State's general obligation pledge as well as the State's consistent maintenance of very strong reserves that have historically been available to smooth the level of budgetary resources available year to year against the inherent volatility of its tax base, which is highly concentrated in commodity price sensitive oil and gas related taxes, rents, and royalties.

Key Credit Considerations

The rating was assigned because of the following key credit considerations:

Credit Positives

• Ample reserve balances and direct liquidity available to support budgetary operations; and,
• Robust natural resource base, which will likely continue to serve as a key economic driver.

Credit Challenges

• Exposure to commodity pricing volatility, given the employment and economic output concentration in natural resource extraction and production;
• Fluctuating budgetary performance, buoyed by the reliance on accumulated reserves to balance fiscal operations; and,
• Elevated pension liability, particularly when measured relative to Gross State Product.

Rating Sensitivities

For Upgrade

• Decreased reliance on Permanent Fund earnings withdrawals to balance budgetary operations.
• A meaningful diversification of revenue sources, alleviating the concentration in commodity pricing sensitive natural resource-derived revenues.
• Improvement in the State's socioeconomic metrics, notably personal income, could lead to upward rating migration over time.

For Downgrade

• A weakening of budgetary performance, reserves, or direct liquidity.
• A continuation of structural budgetary imbalance, leading to the depletion of State’s Permanent Fund to levels no longer commensurate with the assigned rating.

To access rating and relevant documents, click here.

Methodologies

Public Finance: U.S. State General Obligation Rating Methodology

ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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