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Gov. Scott Walker’s austere budget for the 2011-13 biennium could be driving down the interest the state pays when it borrows money, according to the Bloomberg news service. It says the state’s borrowing costs “fell by more than half since the Republican took office in January.”

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Earlier this month, the state sold about $286 million in bonds as part of a debt refinancing plan. The plan, approved by the state Legislature as part of Walker’s Budget Repair Bill, helped balance the state budget by the end of the current fiscal year (June 30) as required by state law.

Bloomberg says the interest the state was required to pay on the bonds was significantly lower than on ones the state sold in January. In the May offering, the bonds sold at just .21 percent above a benchmark (the interest being paid on top-rated bonds) as compared to .47 percent above the same benchmark in January.

“The state’s addressing the fiscal challenges. We’re looking at structural changes, and that’s very favorable for the market,” Duane McAllister, a vice-president and investment manager at M&I Bank, told Bloomberg.

The country’s three largest credit rating agencies, Moody’s, Fitch Ratings and Standard & Poor’s, reaffirmed the state’s bond rating in May. Each maintained their third highest rating for the state: AA2 for Moody’s, AA for Fitch Ratings and AA for Standard & Poor’s.

Walker said in a press release, “Having our bond rating confirmed is great news for Wisconsin taxpayers that will keep debt payments lower.”

A news release from Fitch Ratings referenced his proposed budget, saying it “makes progress toward structural balance.”

One from Standard & Poor’s noted that the stable outlook on its AA rating for the state “reflects our expectation that Wisconsin’s trend of fiscal discipline … will continue, and that the state will act purposefully and quickly to address any budget imbalances.”

But the agency doesn’t attribute all the fiscal stability to Walker, saying, the state “has significantly reduced structural budget deficits in the past several years.”

Bloomberg adds that the lower interest payments for the state’s debt offerings may also be due, at least in part, to a market hungry for state and municipal bond offerings. One investment manager told the news service that demand for Wisconsin’s bonds “may be boosted by a dearth of supply of (municipal bonds) in general and of state general obligation debt specifically.”

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