June 25, 2014 (Boise, Idaho) — Idaho State Treasurer Ron Crane announced that besides the fact that Idaho continues to receive the highest possible rating from Moody’s, Fitch and S&P, based on the conservative approach of the state they are now on record with the lowest interest rates in the history of the Gem State for their Tax Anticipation Notes (TAN).
“Having the excellent credit rating is critical to keeping Idaho’s financial house in order. That credit rating has led to the lowest interest rates we’ve ever seen. Our office, teamed with a legislature and the Governor’s office all have the same approach to keep our budget balanced and spend within our means,” Crane said.
Following the sale of $475 million in TAN notes yesterday Treasurer Crane stated “I am thrilled with the historic low interest rate we were able to acquire on the 2014 notes. It is a reflection of Idaho’s conservative fiscal policy which allows us to borrow at such a low interest rate in an environment of rising interest rates.”
Last year, which was an historic low in interest rates for Idaho, basis points were at .19 or 19/100th of a percentage interest. This year it was down to .11 basis points. Each basis point represents a savings of $47,500 to Idaho taxpayers. So this year’s savings to taxpayers was nearly $400,000.
“Idaho paper is extremely valuable in the marketplace because investors know they will get paid back. This is because we have a track record of managing our finances well,” he continued.
The Treasurer explained “when revenues are down we cut expenses to match those revenues.” “When revenues are up we tuck money away in our savings (rainy day) accounts. It’s not always politically popular to operate this way but the rating agencies and the market place love the way we handle our money,” he said.
Idaho has issued Tax Anticipation Notes since 1983. The proceeds from the sale of these one-year notes are used to level out cash flows throughout the fiscal year, especially when revenues lag expenses by a significant margin.
For example, by mid-November expenditures have reached 60% of the appropriated budget, while at the same time only 40% of revenues have been received. The proceeds from the TAN keep the general fund in the black during this timeframe.
Most of Idaho’s revenue comes in during the fourth quarter, particularly when income taxes come due on April 15th. These fourth quarter revenues are then pledged to repay the notes. After the note repayment account is fully funded the balance goes directly to the general fund.
The ratings from each service is as follows: Moody’s - MIG 1, Standard & Poor’s - SP1 +, Fitch - F1 +, which are the equivalent of a AAA rating.