Alaska refinances $583 million of debt, records credit-rating gains, Department of Revenue tells Senate panel

The Alaska Department of Revenue told the Senate Finance Committee on a presentation that it has refinanced about $583,000,000 of state-related debt in the last nine months, producing roughly $36,700,000 in net present‑value savings and contributing to recent credit‑rating upgrades.

The refinancing activity, Deputy Commissioner Bridal LeMahony said, included the state’s general obligation refundings, Airport System revenue bonds and conduit financings such as for the Goose Creek Correctional Facility and the Alaska Municipal Bond Bank. “All the maturities within the existing debt that was issued previously stays intact,” LeMahony told the committee, saying the department did not extend original maturities when it refinanced bonds.

Committee members heard that the department used a mix of tools — including bond tenders and forward deliveries — to capture market windows and lower interest costs. LeMahony described an unusually high 64% participation rate in one recent bond tender and subscription levels as high as 6.3 times in other sales. She said the airport refunding also freed about $7,500,000 from a debt‑service reserve fund back to the airport system’s general fund.

State Debt Manager Ryan Williams gave a municipal‑market update and the numerical profile of Alaska’s outstanding obligations. Williams said total Alaska public debt outstanding as of June 30, 2024, was about $11,600,000,000 and summarized that state general‑obligation bonds, agency bonds and various supported and moral‑obligation debts are concentrated in a pay‑down schedule that retires about 87% of outstanding principal within the next 10 years. He said net annual debt service for the state was about $64,200,000 on the schedule shown to the committee.

The presentations also described recent rating actions: S&P Global upgraded the state to AA with a stable outlook, Kroll moved the state to AA+ on a recent action, and Moody’s raised certain ratings and outlooks in 2024, including an upgrade of airport system revenue bonds. LeMahony said the department’s outreach, tailored pitch decks, and emphasis on fiscal management and diversified revenue streams (investment earnings, federal receipts and natural resources) were factors in those upgrades. “We put together a pitch deck, demonstrating the state's financial profile,” she said.

Senators questioned how use of the Constitutional Budget Reserve (CBR) to fill budget gaps could affect ratings. LeMahony told Senator Merrick that the CBR is one element rating agencies consider but not the sole determinant: rating agencies assess the state’s fiscal plan and trends in reserves, and a sustained drawdown could be viewed negatively.

Committee members also asked about the treatment of the proposed gas pipeline and related contracts. LeMahony said rating agencies monitor large projects and that if the project reaches FEED (front‑end engineering and design) and a final investment decision, it would likely be positive for ratings. She also said rating agencies generally do not request or review the underlying contractual details of commercial agreements.

Senators requested follow‑up materials: larger or clearer versions of the debt charts, historical debt‑capacity numbers for the prior decade, and numeric breakdowns of the various debt categories. The department said it will provide those items to the committee.

The presentation concluded with a reminder from the chair that the committee’s next meeting would consider three bills the following morning, but no formal votes or actions on debt policy were taken at this hearing.