Maryland officials are considering postponing upcoming bond sales if Congress doesn’t reach a deal on the debt ceiling soon. The state is planning to sell $100 million in bonds to Maryland residents beginning July 22, the same day that President Obama has said he wants to reach a compromise with Republican lawmakers on raising the U.S. debt ceiling and slashing the long-term deficit. On July 27, the state is scheduled to begin selling more than $600 million in general obligation bonds.
“If they don’t have the debt ceiling issue resolved, the markets will be chaotic, and we will probably postpone the sale,” Patti Konrad, director of the Maryland state treasury’s Debt Management Division, warned lawmakers.
Uncertainty over the federal government’s ability to meet its debt obligations could spike interest rates, which would make it more expensive for Maryland to pay back the interest from the bond sales.
U.S. Treasury officials have set an Aug. 2 deadline for Congress to raise the debt ceiling or risk defaulting on its debt.
Obama has called congressional leaders to the White House daily for the past week to work out a compromise that would raise the $14.3 trillion debt ceiling and cut between $2 trillion and $4 trillion from the U.S. deficit over 10 years. But negotiations are gridlocked, and Gov. Martin O’Malley is acutely aware of the implications for Maryland, whose economy is heavily dependent on the federal government.
Maryland ranked fourth in the nation for per-capita federal spending in fiscal 2009, according to the most recent government data. Businesses in the state raked in roughly $34 billion that year in federal contracting dollars.
O’Malley is petitioning Republican governors to weigh in on the issue and urge a compromise.
“The silence is deafening from the Republican governors,” said O’Malley, who is chairman of the Democratic Governors Association. “We need our Republican colleagues to stand up and say, ‘Enough’s enough.’ … The dinosaur wing of their party is silencing the more moderate wing of their party.”
Moody’s Investor Services, one of the three credit rating agencies that reaffirmed Maryland’s triple A bond rating last week, said it must re-examine the ratings of borrowers like Maryland as federal debt talks continue.
Maryland’s economy “continues to be proportionately more affected by the activities of the federal government than any other state,” the agency reported.
Standard & Poor’s also warned, “Absent a timely resolution to the ongoing debt limit negotiations at the federal level, the risks to the state associated with a decline in federal funding could accelerate.”
