May 18, 2012
Augusta – Maine State Treasurer Bruce Poliquin reported that Moody’s Investors Service has affirmed the State’s Aa2 credit rating, and has revised its outlook to negative from stable. During the past several months, the Office of the State Treasurer has led a team of state government officials in discussions with the national rating agencies to update Maine’s credit rating.
During the late spring of each year, Maine state government typically borrows money by selling bonds to investors in order to fund capital projects such as road and bridge construction and repair. In preparation for the bond sale, the State seeks credit updates from the rating agencies. On May 31, the Office of the State Treasurer is planning to sell $55 million of general obligation bonds that were approved by the Legislature and Maine voters during past years. The interest and principal payments to bondholders are secured by the full faith and credit of the State. There is approximately $490 million of outstanding Maine general obligation debt.
In affirming its Aa2 credit rating, Moody’s cited Maine’s credit strengths including its manageable general obligation debt level; rapid 10-year pay back of such borrowing; gradually increasing tax revenues; strong internally managed Treasurer’s Cash Pool; and recent reform to its public pension plan for teachers and state employees that reduced future annual payments from the State’s General Fund.
Moody’s change to negative outlook reflects Maine’s recurring challenges for the Department of Health and Human Services (DHHS) spending primarily for its Medicaid (Mainecare) program; modest Budget Stabilization Fund (rainy day fund) balance; negative General Fund unassigned balance; and slower than average economic recovery – all of which strains the State’s financial liquidity position.
Treasurer Poliquin commented, “I’m pleased that Moody’s Investors Service has affirmed Maine’s solid Aa2 credit rating. This rating will continue to give investors confidence in the quality and security of our general obligation bonds. Our Office anticipates strong demand at the May 31 bond sale.”
The Treasurer further commented, “I appreciate the helpful guidance from Moody’s as Maine continuously strives to improve its credit rating. I note that Moody’s recognized the positive financial impact of state government eliminating $1.7 billion of our unfunded public pension liability last year. This year, the rating agency acknowledges the long-term financial health of our ongoing initiative to right-size our Medicaid program.”
The LePage Administration is committed to creating a business-friendly environment to attract capital investment and private sector jobs. This goal of long-term prosperity for Maine citizens is based on restraining state government spending; reforming public entitlements while maintaining important safety nets based on national averages; addressing long-term financial liabilities; lowering energy costs and health insurance premiums; streamlining business regulations; and investing in public education and infrastructure.