Protect W.Va. Credit Rating

For several years while West Virginia held a monopoly on some types of gambling in this region, state legislators could smile and watch the money roll in. It allowed the state to do many good things that otherwise would not have been possible.

But competition from Ohio, Pennsylvania and Maryland, all of which have casinos of their own now, has changed that. Now, Gov. Earl Ray Tomblin and legislators are going to have to set priorities for the dwindling pot of cash from gambling.

On Tuesday, the Standard and Poor’s financial rating service downgraded its outlook for bonds issued by the state School Building Authority. SBA bonds retain a AAA rating, but it now is followed by a negative rather than a positive. S&P officials said the AAA rating could be in danger within the next two years.

S&P had a simple reason for the change: Revenue from state-sanctioned gambling in West Virginia continues to decrease. Gambling money is the source of $19 million a year the SBA uses to make payments on bonds it issues. Clearly, S&P analysts worry that continuing declines in gambling revenue will affect the SBA’s ability to make those payments.

The lower a government entity’s credit rating, the more difficult it is to sell bonds. Higher interest rates must be used to attract buyers.

In the SBA’s case, that would make less money available for the agency’s sole mission: helping counties improve public schools and build new ones.

For many years, the SBA has done excellent work in that regard. Counties in our area have received millions of dollars in SBA assistance.

S&P officials have good reason to be concerned. Two line items from the state Lottery Commission’s annual reports make that clear.

During the 2011 fiscal year, the commission was able to provide $225.7 million for education in West Virginia. But during the following year, the amount had dropped to $177.1 million.

Tomblin insists the state’s credit rating – not just for the SBA but for West Virginia government as a whole – will be protected. But analysts such as those at S&P will not be satisfied with promises. They will want to see revenue streams formally dedicated to paying off bonds the SBA and other agencies sell.

Tomblin and legislators should make it clear that, even if revenue from gambling continues to decline, the state will ensure money to pay off SBA bonds remains available. If that requires setting priorities – perhaps reducing funds available for other purposes to keep the SBA allocation firm – the governor and lawmakers should take such action. Protecting the state’s credit rating is vital.