N. Carolina bond rating downgraded

RALEIGH, N.C., Aug. 20 (UPI) -- North Carolina's triple-A bond rating has been downgraded by Moody's Investors Service, a decision that could affect the interest rates the state pays on borrowing.

Moody's cited the state's "continued budget pressure, its reliance on nonrecurring revenues, and its weakened balance sheet" as reasons for the downgrade to Aa1.

"The task of restoring structural budget balance and rebuilding faces political and economic obstacles," Moody's said in a statement released Monday. "The state is considering actions which over time could help to restore fiscal stability and rebuild reserves."

The state continues to retain a triple-A rating with Standard & Poor's and Fitch credit agencies.

State Treasurer Richard Moore said Moody's decision was disappointing news. He added that the state would now focus on steps to regain its triple-A rating, including restoring structural balance and building the state's cash reserves.

"Regardless of today's announcement, North Carolina must continue taking the actions that are expected of a triple-A rated state," said Moore. "Now, more than ever, it is imperative that North Carolina carry on its long-standing tradition of fiscal prudence and responsibility in order to regain the triple-A rating that has served us well for so many years."

In a statement, Moore said short-term effects of the downgrade would be minimal.

The downgrade will affect $3.5 billion of the state's long-term debt, Moody's said. It was clear how much North Carolina will pay in extra interest because of the change.

North Carolina isn't alone in its credit rating difficulties. Seven states have received rating downgrades since April 2001, some of them more than once, and by more than one rating agency.