Fitch Places Alaska's 'AA-' IDR on Rating Watch
Negative

Fitch Ratings has placed the state of Alaska's 'AA-' Issuer Default Rating (IDR)
on Rating Watch Negative (RWN). The following ratings linked to the state of
Alaska's IDR are also placed on RWN:

--General obligation (GO) bonds rated 'AA-';

--State appropriation bonds rated 'A+';

--Alaska Municipal Bond Bank Authority (AMBB or the bond bank) 2005
resolution bonds rated 'A+';

--AMBB 2010 resolution bonds rated 'A+';

--AMBB 2016 resolution bonds rated 'A+'.

SECURITY
State GO bonds are general obligations of the state of Alaska to which the full
faith, credit and resources of the state are pledged. Lease-purchase
obligations are secured by annual appropriations from the state's unrestricted
general fund (UGF).

AMBB bonds are general obligations of the bond bank, for which the state
maintains an annual standing appropriation of state general fund resources to
replenish the bonds' reserve fund in the event of borrower default. The

 standing appropriation is the basis for the assigned rating on the 2005, 2010
and 2016 resolution bonds.

ANALYTICAL CONCLUSION
The Rating Watch Negative on Alaska's 'AA-' IDR and GO rating reflects the
severe financial and economic stress the state is expected to undergo as a
result of the recent plunge in crude oil prices, compounded by the negative
impact the coronavirus pandemic is expected have on the state's important
fishing and tourism industries. Further, the state's operations rely on revenue
from earnings of its Permanent Fund (PF), which saw its value decline from
$66.3 billion as of July 1, 2019 to $56.5 billion as of March 23, 2020, an
almost 15% decline. Fitch will be examining in detail the potential impact of
the market decline on the viability of the PF Earnings Reserve (PFER) over the
short to intermediate term. Any valuation losses in the PFER from the current
financial market turbulence would be compounded by potential state action
to appropriate additional sums to residents as a means of economic stimulus.

The RWN is expected to be resolved following Fitch's analysis of the state's
Spring 2020 revenue forecast, which is expected to be released in April, and
will consider state actions to address the anticipated economic and revenue
weaknesses.

Economic Resource Base
Alaska's economy is largely based on the development and application of its
abundant natural resources, the production of crude oil and natural gas
deposits, prominent fishing industry, and mining and tourism. The oil and gas
sectors has a broad impact on the state's economy, captured in the 25% of
gross domestic product (GDP) that comes directly from natural resources and
mining, but additionally expanded by the multiplier affects from these
turbulent sectors. The state's GDP has been flat to declining since 2013,
exacerbated by the rapid deterioration in crude oil prices that began in late
2014 that reduced related employment and resulted in the state's
unemployment rate exceeding the nation's, where it remains to date.

 Volatility related to the current coronavirus epidemic, shrinking demand for
oil, and fallout between OPEC and Russia on prices and global production
brought prices to a low of $23.91/ANS bbl on March 18, 2020. This price level
is far below that assumed in the state's forecast used to enact the current
budget. The scale of the impact to the state's economy and revenues, which
is also expected to be negatively affected by declines in the important
tourism industry from the coronavirus pandemic, is currently uncertain.

KEY RATING DRIVERS
Revenue Framework:: 'a'
The state is expected to continue to derive an outsized proportion of its
operating revenues from taxation, leasehold interest, and royalty payments
related to petroleum development. These narrow revenue sources will
continue to reflect the economic volatility tied to the natural resources sector.
Matching these sources are now annual draws from the state's PFER in
support of general operations. The state has complete control over its
revenues, with an unlimited independent legal ability to raise operating
revenues as needed.

Expenditure Framework:: 'a'
While Alaska maintains the broad expense-cutting ability common to most
U.S. states, multiple years of consequential cuts to core services; some of
which the state has been unable to implement, and the continued provision
of a statutory dividend payment during periods of revenue sluggishness
meaningfully reduces its operating flexibility. These actions limit the state's
flexibility when confronted with an economic downturn.

Long-Term Liability Burden:: 'aa'
On a combined basis, the state's net direct debt and adjusted net pension
obligations are elevated but still in the moderate range, relative to the
resource base, although well above the median for U.S. states. Other post-

 employment benefit (OPEB) obligations are sizable but well-funded. Both
pension and OPEB liabilities are constitutionally protected benefits.

Operating Performance:: 'aa'
Historically, the state's strong management of its financial operations and
extraordinary reserve balances has offset volatility in its revenue sources.
However, the state's difficulty in achieving consensus on balancing its
operating budget from recurring revenues has led to multiple consecutive
draws on accessible reserves. The sustainability of draws on the state's
accessible reserves remains a key credit consideration, and weakness in rates
of return, as well as withdrawals from the PFER that exceed the statutory
percent of market value (POMV) formula, would result in escalated reserve
depletion and diminished resiliency.

RATING SENSITIVITIES
Developments That May, Individually or Collectively Lead to Negative Rating
Action

--Financial Resilience: Planned, significant draws on the state's accessible
reserves to balance financial operations or to fund other priorities in light of a
likely extended period of weak natural resource markets and financial market
volatility, will lead to a downgrade.

--Budget Management: Failure of the state to enact measures that make
substantial progress toward a structurally balanced budget in fiscal 2021 in
response to the recent plunge in crude oil prices will lead to a downgrade.

Developments That May, Individually or Collectively Lead to Positive Rating
Action

 --The RWN could be removed and ratings affirmed if the state advances
financial policies in the current legislative session that promote stable
financial performance and make progress toward improved financial
resiliency.

CURRENT DEVELOPMENTS
The final operating and capital budget for fiscal 2020 totaled $5.4 billion (an
8% reduction from fiscal 2019) including an almost $1.1 billion dividend
payment (a 4% increase from fiscal 2019). The budget was premised on
average Alaska North Slope (ANS) crude oil prices of $66/barrel (bbl) for the
year. The state was unable to deliver on approximately $120 million in
Medicaid program cuts and in conjunction with other funding needs, the
governor sought to supplement the fiscal 2020 budget by approximately
$239 million. As the coronavirus crisis unfolded and oil prices plunged, the
legislature is now debating further increases to the supplemental budget to
fund coronavirus related costs as well as provide an additional $1,000 per
capita stimulus payment to its residents by a further draw on the PFER in
response to the oil price plunge and the coronavirus crisis. These actions are
expected to further declines to the state's reserves.

As the legislature considers the supplemental budget bill for fiscal 2020, both
houses have moved forward on the governor's proposed $5 billion operating
and capital budget for fiscal 2021 and proposed $2 billion dividend payment.
The governor's proposal was based on average ANS price of $59/bbl and
would result in a $1.5 billion operating deficit that would be funded by a draw
on the Constitutional Budget Reserve Fund (CBRF), bringing the CBRF balance
to about 12% of appropriations, not including any further drawdowns from
the fiscal 2020 supplemental budget bill. The Senate's recently approved
budget considers the recent plunge in crude oil prices and includes average
ANS oil price of $35/bbl for the remainder of fiscal 2020 and fiscal 2021.
Specific details on the legislature's budgets are forthcoming; however, the
Senate's budget would result in a decline in the CBRF to about $533 million
(11% of unrestricted general fund [UGF] appropriations) and a decline in the
PFER to $9.1 billion.

CREDIT PROFILE

 Until fiscal 2019, the state's operating budget (UGF) was almost entirely
supported by volatile petroleum-related revenues. In fiscal 2014, at the peak
of oil prices, 88% of UGF revenues were derived from this sector; this ratio
declined to about 39% in fiscal 2019 due to the substantial decline in oil
prices and beginning use of draws from the PFER (31% of revenues) for
operations. Under the Permanent Fund Protection Act of 2018 (the 2018 Act),
the state is permitted to make annual draws on the PFER to fund the dividend
payment to residents as well as apply to financial operations under a formula
that restricts the amount of the total annual draw. Modest, additional sources
of UGF revenue include various excise taxes, corporate income taxes, and
fisheries and mining taxes. The state does not levy a personal income or
sales tax. Historically, the state has applied funds from its accessible reserves
to fund operations when petroleum-related revenue has fallen short.

Through fiscal 2019, the state has implemented substantial cuts to its
expenditures and sharply reduced the PF dividend in fiscal years 2017, 2018
and 2019, yet these meaningful actions were insufficient to balance the
state's budget, even with draws for operations from the PFER commencing in
fiscal 2019. Revenue proposals under the prior administration did not receive
sufficient traction for passage and reserves were instead rapidly diminished,
weakening resiliency. The realized earnings segment of the PFER balance
totaled about $16 billion at the end of fiscal 2019 but is forecast to decline to
$12.4 billion in fiscal 2020, absent additional state draws.

For additional detail on the state of Alaska, please see "Fitch Downgrades
Alaska's IDR to 'AA-'; Outlook Stable" dated Sept. 5, 2019 and available
at www.fitchratings.com.

In addition to the sources of information identified in Fitch's applicable criteria
specified below, this action was informed by information from Lumesis.

ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of ESG credit
relevance is a score of 3 - ESG issues are credit neutral or have only a
minimal credit impact on the entity, either due to their nature or the way in
which they are being managed by the entity.

 Alaska has an ESG Relevance Score of 4 for Biodiversity and Natural Resource
Management due to its exposure to the impact of natural resources
management on economy and governmental operations which, in
combination with other factors, has a negative impact on the credit profile,
and is relevant to the rating in conjunction with other factors.

Primary Rating Analyst
Marcy Block
Senior Director
+1 212 908 0239
Fitch Ratings, Inc.
Hearst Tower 300 W. 57th Street
New York 10019

Secondary Rating Analyst
Douglas Offerman
Senior Director
+1 212 908 0889

Committee Chairperson
Karen Krop
Senior Director
+1 212 908 0661

MEDIA CONTACTS

 Sandro Scenga
New York
+1 212 908 0278
sandro.scenga@thefitchgroup.com

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