NEW YORK: S&P Global Ratings changed its outlook on the state of Colorado's AA issuer credit rating to negative from stable on Thursday because the state has contributed less annually to its retirement systems, the firm said in a report.
The state's combined pension funded ratio has fallen to 43 percent, compared to a ratio of 60 percent as recently as two years ago, the report said.
"Although some of the drop in the funded ratio is the result of the state's adoption of more conservative assumptions, including its rate of return, which we view favorably, it continues to annually fund less than its ADC (actuarially determined contribution) and the gap needed to fully fund the retirement systems grows further," it said.
S&P said it could lower the state's issuer credit rating if the state's combined pension funded ratio continues to decrease during a two-year outlook review period.
"Should the state's combined pension funded ratios continue to decline during our two-year outlook horizon, with no significant plan in place to improve pension funding, we could lower our state ICR (issuer credit rating), which we see as a one-in-three possibility," S&P said.
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