Two of Wall Street’s bond firms have given Maryland their top rating after the third, Moody’s, downgraded the state government earlier this month.
S&P Global affirmed Maryland’s AAA rating on its bonds Wednesday, following a similar decision from Fitch Ratings last week.
The three ratings agencies assess the creditworthiness of government agencies, assigning a rating to the bonds that agencies issue to finance debt such as construction projects.
A government’s bond rating is akin to how an individual’s credit score influences interest rates for mortgages and car loans. A worse rating means the state may have to pay more interest when it pays back bondholders.
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As S&P kept Maryland at a coveted AAA rating, it said the outlook for the state’s ability to pay its debts is stable, which “reflects our expectation that the state will make timely adjustments to achieve a structural balance and adequate cash reserves by proactively managing economic and budgetary risks that arise.”
Fitch Ratings announced last week that it was also keeping Maryland at AAA, though it noted “challenges remain with long-term liabilities and education funding.”
A joint statement from top elected Democrats — Gov. Wes Moore, Lt. Gov. Aruna Miller, Treasurer Dereck Davis, Comptroller Brooke Lierman, House of Delegates Speaker Adrienne A. Jones and Senate President Bill Ferguson — said the bond ratings reflect the state’s fiscal strength.
“Even amid enormous federal headwinds that continue to affect the entire region — from government layoffs to massive budget cuts — Maryland stands strong,” the statement read. “Our state faces unique exposure to the impacts of the federal government. But our commitment to growing our economy and protecting our people will not waver.”
Earlier this month, Moody’s Ratings set Maryland at Aa1, a one-step downgrade from the state’s previous Aaa rating.
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Maryland’s state budget faces a projected long-term imbalance, as revenue from taxes, fees and other sources hasn’t kept up with planned spending.
A significant driver of the imbalance in future years is the Blueprint for Maryland’s Future, an ambitious plan intended to improve public schools. Lawmakers dedicated some funding streams to the Blueprint, but not enough to cover the cost of all of the programs as implementation ramps up.
The imbalance could get worse, depending on actions from President Donald Trump — who already has slashed federal jobs in Maryland — and the Republican-led Congress that is searching for budget cuts.
In the short term, Moore and state lawmakers patched the next state budget with a combination of tax and fee increases and spending cuts. The most recent round of budget negotiations started with a more than $3 billion shortfall, but ended up with a slightly positive one-year balance when all was said and done.
The top Maryland Democrats issued a statement blaming the Moody’s downgrade on Trump.
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At a recent public meeting in Annapolis, Davis, the state treasurer, criticized Fitch’s analysis, saying that Maryland is sure to pay back its bonds in a timely fashion, and there’s no risk to investors. He concluded his remarks by declaring: “To hell with Moody’s.”
Until this month, Maryland had boasted top bond ratings from all three ratings agencies for decades. Moody’s had granted Maryland its top rating since 1973, S&P Global since 1961 and Fitch Ratings since 1993, according to the state treasurer’s office.
Maryland was one of only 15 states with top ratings from all three agencies.
