Fitch affirms ‘AAA’ rating for Florida after downgrading federal credit rating

Fitch Ratings has affirmed a “AAA” credit rating for the state of Florida on Wednesday after downgrading the federal government’s credit rating earlier this month.

The U.S. government’s rating was struck down to AA+ from AAA, which is the highest possible rating. The new rating still constitutes a high investment grade.

Fitch cited issues with political divisions and increased federal spending as the cause of the downgrade.

However, Florida was affirmed at the AAA rating due to due to its “history of sound financial management practices, high gap-closing capacity and reserves, and low long-term liability,” Fitch Ratings reports.

According to Fitch, Florida’s revenues have exhibited more “economic sensitivity” than other states in the U.S., with Florida being able to raise its revenue despite restrictions on the levy of a personal income tax.

Additionally, Florida has been able to cut down on much of its debt — approximately one quarter of the state’s outstanding debt since 2019, as mentioned by the governor’s office — with low carrying costs for its debt, the report reads.

Much of the state’s success is attributed by Fitch to its population growth, with a huge surge of people moving to Florida during the COVID-19 pandemic.

“Florida now has a better bond rating than the entire country,” Florida Chief Financial Officer Jimmy Patronis said on Thursday. “Proof that prudent spending and debt reduction matters. It’s why Florida’s in the best fiscal health in state history.”

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