Tax and Bond Votes May Affect Credit Quality in a Few States
Voters in 36 states will decide on 153 tax-related measures and bond authorizations on Nov. 4, but only a handful of them have the potential to impact credit quality, said Standard and Poor’s RatingsXpress Credit Research.
Massachusetts heads the list with Question 1, which asks voters whether they approve halving, then repealing the state income tax by 2010. S and P points out that the income tax accounts for about 40 percent of the state’s revenues.
If this ballot initiative receives voter approval, we would place all Massachusetts’ general obligation (GO) bonds on CreditWatch with negative implications, pending legislative deliberation on the measure.
North Dakota residents will vote on whether to reduce personal and corporate income tax rates, which would reduce revenues by an estimated 16 percent.
Oregon’s Measure 59 asks voters to decide whether to remove a cap on the amount of federal income taxes a resident can deduct from taxable state income. If the measure passes, S and P predicts the state will need to make major changes to maintain a balanced budget.
California has more than $16.83 billion in new state-supported debt authorizations on the ballot, which if passed, would add to the $58.6 billion of unissued state debt that has already been authorized and the $57.6 billion of currently outstanding state GO bonds.
S and P has written previously about California’s Proposition 7, which would require government-owned utilities to generate 20 percent of their electricity from renewable energy by 2010, 40 percent by 2020 and 50 percent by 2025 for all utilities.
For details on the ballot referendums in all 36 states, see “Income Tax Cuts Have the Most Significant Credit Implications Among November Ballot Measures.”
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