Maryland Struggles to Avoid Bond Downgrading

By Megan Poinski,

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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