Maryland government is expected to exceed its self-imposed debt limit in two to three years, a fiscal analyst told lawmakers Friday. But there is no indication that Maryland is likely to see any downgrading of its triple A bond rating as the state prepares to sell $400 million in bonds Feb. 27, Treasurer Nancy Kopp said.
Moody?s Investor Service, one of the big-three government bond rating agencies, issued a report earlier this week indicating that some states might have their ratings lowered “based on the decidedly weaker economic environment.”
But Kopp said in conference calls with Maryland officials this week, the bond raters from the three firms “were impressed by the special session” and the state?s willingness to raise taxes to fix its structural deficit.
“In the eyes of investors, it was tremendously important,” Kopp told the House Appropriations Committee. “They like to see a state that?s willing to invest in public infrastructure,” as well as in work force development through spending on public education.
Maryland is one of seven states with the highest AAA bond rating, a benchmark it has held for decades. The credit rating allows Maryland to pay low interest rates on its public debt.
The rating agencies favor Maryland?s policy of keeping debt below 3.2 percent of personal income. Debt service ? principal and interest on its bonds ? is also kept well below 8 percent of the state budget.
Analyst Patrick Frank said Maryland will go above the 3.2 percent limit in 2010, 2011 and 2012. “We?ve been growing debt faster than the growth of the economy,” Frank said, and that is “not sustainable.”
But Anne Konrad, director of debt management for the treasurer, said the higher debt in those years is largely due to the GARVE bonds (Grant Anticipation Revenue Vehicles) floated to build the $2.6 billion InterCounty Connector from Gaithersburg to Laurel. Those bonds are based on future federal transportation funds coming to the state, not on the state?s own revenues.
