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Published on February 6th, 2012 | by Len Lazarick

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Maryland struggles to avoid bond downgrading

By Megan Poinski
Megan@MarylandReporter.com

State Treasurer Nancy Kopp

State Treasurer Nancy Kopp

Despite the state’s efforts to remain fiscally sound, Maryland is struggling to avoid the downgrading of its cherished top triple A bond rating due to possible federal budget cuts, State Treasurer Nancy Kopp told the House Appropriations Committee Friday.

“It’s very frustrating because everything you do, everything we do, they agree is top notch,” Kopp said. “But we cannot control the United States Congress.”

In December, Moody’s reassessed Maryland’s rating and maintained its negative outlook – as well as the negative outlooks given to Virginia and New Mexico. According to Moody’s, Maryland has “high concentrations of federal government employment and federal procurement,” and is exposed to the consequences of downsizing and spending cuts.

Kopp told the Appropriations Committee that Moody’s may automatically downgrade Maryland’s bond rating if it decides to downgrade the federal government. She said that the state is trying its hardest to ensure that does not happen.

The top bond rating saves the state millions in interest, and is also seen as a symbol of the state financial discipline.

State officials are working to get Moody’s analysts to consider Maryland as its own entity, and if necessary, give the state a higher rating than the federal government. Maryland’s economy is doing well, its work force is diversified, and its education is system is top-notch, state officials point out.

Kopp said that Moody’s analysts are paying close attention to several of the actions Maryland has taken toward more solid future sustainability. Analysts were impressed with pension reforms passed by the General Assembly in 2011. They also were given a detailed tour of the Base Realignment and Closing sites – known as BRAC — and the jobs it has brought to the state.

“It’s hard going because they seem to think they have an automatic tool,” Kopp said.

When Standard & Poor’s downgraded U.S. Treasury notesin the midst of partisan turmoil last summer about raising the federal debt ceiling, Maryland’s bond rating received a negative outlook. Maryland’s economy is closely tied to that of the federal government, with hundreds of government agencies and thousands of federal employees and contractors within the state.

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  • party

    always blame someone else…..THE GOVENOR AND ASSEMBLY KNOW THE DEAL THEY CONTINUE TO PLAY ,TAX  AND TAX THEIR IST CONCERN IS THEIR BENEFITS AND EGO.

    THEY ARE THE ONE PERCENT…….TOO BAD FOR THE REST OF US.

  • mom

    Everything they do is top notch?  Does that include balancing a budget with federal funds that everyone knows can dry up at any time?  Give me a break.  This gov. and GA  have done everything to add the instability in this state.  And they’ve gerrymandered to see to it that it stays that way.

  • harry sinclair jr.

    why???   would any body be surprized????

  • Songinthetrees

    Interesting.  Both Moody and S&P have shifted their own internal balance sheet.  What what once considered an asset, proximity and interdependence to the jobs the federal gov’t. provides, is now a liability?  Seriously?  Even if the gov’t. workforce does become parred down, which will be extremely difficult under this administration, we are still talking about the government.  No, if Md’s rating is dropped, and it probably should be, it’s because the govenor and the legislative body have spent and allocated funds based on the presumption that the people’s property taxes would remain high enough to support the social programs.  Ideologies smacked up against practicalites.  It’s because Md. has not addressed those variables which continue to sap our economy.  A large illegal workforce that is draining our educational budgets, increasing our need for addtional police protection and overloading our social service programs.  It’s because we passed legislation to legalize gambling, thus increasing our budget need to respond to the crime, social decay and subsequent financial ruin that accompanies the practice.  Who can afford to gamble in this economy?   The knee-jerk response to increase taxes on businesses will only put the burden on the people who remain to pay taxes, which will continue to dwindle as they seek financial prudence and fiscal responsibility from other state governments.  No, if you lose our rating, it’s not because of our proximity to the federal government, but perhaps Moody and S&P see that our “Stateview” is very similar to the Federal Gov., specificaly’s Obama’s, and that certainly is cause for fiscal concern.

  • http://www.facebook.com/people/Dale-McNamee/100002467161143 Dale McNamee

    The loss of the “AAA” rating couldn’t happen to a nicer bunch…I hope that this happens so that the “fans” of state government wake up to what’s been going on…

    Time for the fantasies to end…And for austerity to begin !

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  • Whcampbell

    During the 2010 general election campaign I warned about Maryland’s potential rating downgrade.  I was routinely criticized for being a peesimist.  I may be pessimistic about Maryland’s inability to live within its means, but I understand finance. Twenty seven percent of Maryland’s FY 2012 budget comes directly from the Federal government.  At least 10 % of our highly paid residents work for the Federal government as employees, military members, retirees, or contractors.  A significant amount of the $85 billion (B) in Federal contracts that went to Maryland firmsin FY 2011 will suffer budget cuts.  Federal job vacancies will either be eliminated, or left unfilled.  In addition, we have pushed ourselves to our rState’s borrowing  limits.  If the General Assembly continues to raise spending, even with tax increases to pay for them, Maryland will probably lose its AAA credit rating.  The significant emotional event that will trigger the downgrade will be when after significantly raising taxes and fees, the State raises its debt limit.  Even though we will technically be within our funding parameters (8 % of revenue), it will send a clear message that we are unable to be good stewards of the public’s finances.  The inability to solve the pension funding shortfall will be the elephant in the room.  The rating agencies warned us about this problem last year..  It is not too late to change our fate.  The first step should be to reject the Governor’s ill conceived FY 2013 budget, and cut spending by at lest 3 %.  

    • Anonymous

      O’Malley’s budget will not make it through in its present form. Spending will be cut, a little, but have an overall increase wiping out any tax hikes.. As long as we have a one party state, ruled by certain selected counties that are running HUGE county budget shortfalls, nothing I regret will change. Remember these are the same people that brought us slots while PA, Delaware & WV were going to Vegas style gambling. They live in an alternate reality not unlike the Twilight Zone & those of us remaining in the state will reap the bitter fruit from their bad fiscal decisions.

  • Anonymous

    Given S&P’s downgrade of the Feds, a PRUDENT fiscal manager would take a HARD look at a Governor & State Legislature that continually runs a budget deficit; plugs the deficit hole by raiding dedicated state funds or fed stimulus $$; then tells taxpayers that they’ve made the “hard cuts” while increasing that budget each year. MD’s forensic monetary solution?  Raise revenue with taxes on property, gas, alcohol, tobacco products, toilet flushes & general sales tax along with hiking motor vehicle fees & tolls, while promoting placing windmills on the Atlantic Coastline that Delaware shot down, increase spending on school construction, build a new state complex in Balto city, etc.
     
    What are these people smoking? Especially Ms Knopp who hasn’t met a state bond spending proposal by O’Malley that she didn’t like! And Franchot was supposed to be the liberal/progressive in the group, until he got a good look at the books!

    • http://www.facebook.com/people/Dale-McNamee/100002467161143 Dale McNamee

       Hi Abby !

      I agree with you wholeheartedly ! The Governor and the Legislature have been over-spending for decades because they could count on the Feds for revenues ( taxes & Federal programs, and the “Beltway Bandits” ), never thinking of what if revenues are cut…

      They NEVER had to deal with any losses and since there so many well paid government employees ( Fed, State, Local ) and the state economy was “recession proof”…

      So, now…

      It’s not only what they’re smoking, but what they’ve been drinking, and breathing in the air…Also, Annapolis, Baltimore, & DC give Universal Studio & Disney World a run for the money in the fantasy department…

      The local media don’t help…Plenty of time for trivia on the news shows and almost next to no time on subjects such as this…

      Then, there’s the voters who vote these people in time after time…The very definition of insanity : Doing the same things time after time and expecting different results !

  • Barry Dennis

    It says a lot that one of the richest states, with highest levels of income, cannot balance it’s budget because of profligate spending on entitlement programs.

  • party

    KNOPP .STOP BLAMEING THE FEDS  YOU KNEW THE DAYS WAS COMING YOU DID THE MOMS BIDDING ….YOUR SALARY AND BENEFITS SHOULD BE CUT OR JUST RESIGN..TAKE THE LOSER WITH YOU.

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