‘Stayed the course:’ Florida receives higher credit rating than the US. Here’s why

On Thursday, Fitch Ratings again affirmed a AAA credit rating for the state of Florida — the highest rating that Fitch has to offer.

This puts the state above the U.S., which as a whole was downgraded to AA+ by Fitch last year due to political divisions and massive debt struggles at the federal level.

In the same year, Fitch affirmed the Sunshine State at its highest rating due to the state’s “history of sound financial management practices, high gap-closing capacity and reserves, and low long-term liability.”

And in its most recent affirmation, Fitch provided the following reasons why Florida receives such a high rating:

• REVENUE: State revenue is mainly driven by sales tax receipts, but even without a personal income tax, Florida has still been able to raise plenty of funds.
• SPENDING: Florida demonstrates excellent spending habits, with low interest rates on its debts and the ability to cut down on expenses as needed. Earlier this year, Gov. Ron DeSantis vetoed over $500 million in line items from the state’s budget to help minimize costs and bolster the state’s reserves.
• POPULATION GROWTH: With millions moving to Florida and even more expected in the coming years, the state’s GDP could outpace the country’s over the long term. However, this may come with some unpleasant drawbacks for state residents.
• LONG-TERM DEBTS: Florida boasts the lowest per-capita state debt in the country. DeSantis announced that during his time in office, the state has paid off over one-third of its debts since becoming a state in 1845.

“Florida has a higher rating and lower default risk than our country overall, because Washington D.C.’s out-of-control spending and debt burden caused Fitch to downgrade the U.S. credit rating last year,” DeSantis wrote on Friday. “Despite the federal government’s reckless policies fueling inflation, Florida has stayed the course and proven that fiscal responsibility works.”

However, there are a couple of scenarios that could cause the Sunshine State’s credit rating to be at risk.

According to Fitch, if the state fails to act on changing economic conditions and address any budgetary challenges — actions contrary to Florida’s record of financial management — it could lower Florida’s credit rating.

In addition, if population and economic growth slow down too much, it could weaken Florida’s ability to garner revenue, which would also put its credit rating in jeopardy.

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