State delays this month's bond sale

February 12, 1992|By John W. Frece | John W. Frece,Annapolis Bureau

ANNAPOLIS -- Maryland officials have postponed the state's February bond sale because General Assembly leaders have been unable to devise a budget and tax package for next year.

Maryland Treasurer Lucille Maurer said yesterday that without a firm agreement on a plan to cut spending, raise taxes or both, the information the state traditionally provides New York bond-rating houses before a sale would be incomplete. Without a plan, the state could risk losing its prized AAA bond rating, she implied.

"I certainly wouldn't recommend going to the bond market," she said. "The last thing you'd want to do is go to the bond market without a plan for the budget and the future."

A postponement of a month or two in the bond sale could delay distribution of funds to certain capital projects or create some temporary cash-flow problems, but it is unlikely to cause any lasting hardships, Mrs. Maurer said.

Maryland is one of only five states that retain the highest possible AAA bond rating from all three major bond-rating firms. But top officials have been saying for weeks that they're worried about losing the rating unless the state finds a way to balance its budget.

At a meeting of the Senate's Budget and Taxation Committee Monday, Chairman Laurence Levitan, D-Montgomery, said the failure to reach agreement made it more likely than ever that the state would end the current fiscal year with a deficit June 30.

"No one's addressing the '92 problem," he said. "If we're going to have a deficit, it might as well be a big one."

To that, Senate Minority Leader John A. Cade, R-Anne Arundel, responded: "You can kiss the AAA rating goodbye."

The AAA rating is important because it generally assures the state of having to pay the lowest rates of interest when borrowing money.

Legislative budget analysts estimate that if Maryland's rate dropped to AA it could cost the state up to $86.9 million in additional interest payments over the next 25 years. Such a change also could put other types of bonds at risk, including bonds sold to raise money for transportation and environmental projects.

Marvin Bond, a spokesman for state Comptroller Louis L. Goldstein, said Maryland has always been able to retain the AAA rating because it has responded swiftly when faced with serious financial problems.

"That's what has kept us aside and apart from other states," he said.

Mr. Bond suggested the sale could be rescheduled in March.

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