Policy Documents

Changes in Moody's Credit Scores Could Cost Oklahoma Dearly

Scott Moody and Wendy P. Warcholik –
March 2, 2011

Moody’s Investors Service recently made a major change in how it will calculate a state’s credit rating. Oklahoma policymakers should take notice.1

In a nutshell, Moody’s will now include a state’s unfunded pension liability, along with the traditional net tax-supported debt, when determining a state’s credit rating. This change is particularly significant for Oklahoma.

Under the traditional net tax-supported debt (NTSD), mostly general obligation bonds, Oklahoma’s debt burden is quite low.2 As shown in Chart A, Oklahoma’s NTSD as a percent of Gross Domestic Product (GDP) in 2009 was 1.4 percent, which ranks on par with neighboring states3 and significantly below the national average of 3.3 percent.