Politicians love to gloat about high bond ratings. Gov. Martin O?Malley is no different.
Last week he gushed about how Maryland?s newly reaffirmed triple A rating, the highest, from the three major bond-rating agencies demonstrates “remarkable fiscal stewardship.”
If only that were the case.
High ratings are a good thing. They mean lower interest rates for state debt and save taxpayers money.
But how states achieve a high rating means little to the agencies bestowing the rankings. The only thing they care about is a willingness and ability to fill the state treasury by whatever means possible.
In the case of Maryland, that reflects legislators? decision to raise taxes across the board in the last two legislative sessions and the governor?s decision to push that solution and sign those taxes into law.
That gives legislators high marks for expediency, but F?s on prudence and leadership in the face of growing economic adversity.
And it does not guarantee the agencies will reissue a high rating at the next bond issue. That decision is in part contingent on whether the slots referendum passes in the fall.
As Moody?s wrote in its report last week, “Should voters reject the proposal, or if there are delays in VLTs coming online, the state will again face significant budget deficits, for which resolution may pose more challenging after the significant efforts to cover the fiscal 2009 budget gap.”
Moody?s is right to note problems caused by delays, because the shrinking credit market could pose problems for companies interested in buying a slots license and building an entertainment venue for them. Falling gambling revenue around the country could also indicate the state?s take could be lower than it anticipated — another issue that could jeopardize Maryland?s fiscal health.
All of these issues point to the fact the state should not be relying on what-ifs to balance the budget. We support slots, but relying on passing the referendum to plug a deficit is lazy and dangerous. Legislators and the governor should instead be combing the budget for structural ways to cut state spending and forget about slots money until after the election. The people of Maryland bought into the idea that taxes were “necessary” to fix an emergency last year. We doubt they will be so gullible the next time around.
