By Rory Carroll
SAN FRANCISCO (Reuters) - Alaska Governor Bill Walker said on Tuesday the lowering of the state's credit ratings by Standard and Poor's was "premature" since the legislature has not yet had time to act on his ambitious plan to address the state's large budget deficit.
Standard and Poor's on Tuesday lowered Alaska's general obligation (GO) debt to AA+ from AAA due to its belief that the oil-producing state's credit quality has continued to slide amid sustained low oil prices.
S&P also lowered its rating to A+ from AA on some bonds that were issued by the Alaska Energy Authority and are backed by a moral obligation pledge from the state, among others.
More than any other U.S. state, Alaska has been hit by the downturn in oil prices that began in mid-2014. In recent years it has relied on oil and gas production-related taxes to provide it with nearly 90 percent of its general fund revenues.
But with a supply glut pushing crude oil prices to near 11-year lows, Moody's expects a 68 percent gap between Alaska's revenues and expenditures this year.
"This is the most imbalanced budget of any state," John Lombardi, associate analyst at Moody's Investors Service, told Reuters this week.
To close the gap, Walker last month proposed taking a portion of the revenue generated by the state's $47 billion permanent fund, which is paid out to residents annually via a dividend, and diverting it to help pay for services.
He has also called from imposing an income tax on residents, the first in 35 years.
Moody's on Tuesday called Walker's proposal a "fundamental shift" in how the state derives revenues but said it will be politically difficult to implement since residents would take a hit from both the new income tax and a reduced dividend.
Lombardi said that without major fiscal changes, the state could face a downgrade from his ratings agency as well.
Moody's assigned Alaska a negative outlook in December 2014 and the state is currently rated AAA negative.
While Walker called Standard & Poor's downgrades "concerning and premature," he said he hopes they will serve as a wake-up call to lawmakers that action is needed, and encouraged them to read the agency memos in their entirety.
"This further solidifies the need to address our state's fiscal challenges in the immediate future," Walker said.