Utah’s Credit Rating Might Not Fall with Federal Default

(KPCW News) Utah’s AAA bond rating may not be affected if the federal government defaults on its bills. Senator Lyle Hillyard, co-chair of the Utah Legislature’s Executive Appropriations Committee, says unless the federal bond rating takes a significant downgrade, Utah should be in the clear. He says the state received information from Standard and Poor’s last week that if that happens, it will re-evaluate AAA-rated states, including Utah. But S& P followed up by saying if the U.S. credit rating goes down only one grade, it will not look at Utah.

“The state of Utah, we’ve done our borrowing.” Hillyard says. “I don’t see any bonds being issued by the state at least until next July and lots of things could happen between now and then. I’m not staying up nights worrying about it because I don’t think it will be a particular problem and if it is there’s nothing I can do about it.”

But Hillyard notes that just because the state isn’t borrowing money in the near future doesn’t mean local entities won’t feel the sting.

“All the local school districts are tied into us. ” He says. “If for example the Granite school district or the Logan school districts or one of those school districts were issuing a bond during this time period, they rely on our AAA bond rating and if for some reason we were downgraded with a significant drop on the national level, it would mean that their interest that they would have to pay would be increased significantly I would suspect.”

Hillyard says if Congress ultimately decides to raise the debt ceiling with no other action, it would not solve the problem, and still reflect poorly on the federal credit rating.