Officials try to ease fears over AAA bond rating STATE HOUSE REPORT

February 12, 1993|By Marina Sarris | Marina Sarris,Staff Writer

The governor, comptroller and treasurer sought yesterday to calm fears caused by reports that Maryland's top-notch credit rating may be in trouble.

They issued a letter saying they expected the state to keep its high bond rating, which allows the government to borrow money at low interest rates and thereby save taxpayer dollars.

But the trio did not deny a legislative memo that said the Standard & Poor's Corp., a bond-rating agency, has considered placing Maryland on a "credit watch" because of its budget problems.

According to an internal memo by William S. Ratchford II, the legislature's chief fiscal adviser, "The rating agencies plan to visit Annapolis in March, and we can anticipate difficult questions about the state's fiscal outlook. Concerns of the rating agencies include the lack of recovery in the state's economy, the low level of reserve funds" and the state's recurring budget shortfalls.

Maryland's "Rainy Day" reserve fund, which is used to fill temporary deficits, does not have as much money in it as bond-rating houses would like, according to the memo.

Maryland is one of only six states with a AAA bond rating, the highest possible, from all three of the nation's leading bond-rating houses.

The rating houses are "looking at all states very hard because of the impact of the recession," Treasurer Lucille Maurer said. "They are concerned about the outlook for the economy for the longer term. They may be concerned about [the accuracy of] our revenue estimating."

Those estimates have fallen short repeatedly in the last three years, forcing the governor and legislature to cut the budget mid-term.

Nonetheless, the state is not in immediate danger of being placed on a credit watch or losing its AAA rating, Mrs. Maurer said.

An official at Standard & Poor's yesterday suggested that Maryland is not in bad shape with the rating house. "Today we don't have any plans to put the state on a credit watch," said Sally Rutherford, Standard & Poor's director of municipal finance. "We will be looking very carefully at their budget plan for the 1993-1994 fiscal year. While we have had concerns about the state's financial position, we have seen strong financial management."

In the state Senate, fiscal leaders responded with calls for budget cuts. Sen. Laurence Levitan, D-Montgomery County, who chairs the Budget and Taxation Committee, said about $100 million should be trimmed from the governor's proposed $12.7 billion budget for the year that begins July 1.

Even education is on the table. And it may now be more difficult to get rid of keno, since it brings in revenue.

Mr. Levitan's counterpart in the House of Delegates criticized the call for budget cuts.

"It's not clear that cutting $200 million or $100 million will address this issue," said Del. Howard P. Rawlings, the Baltimore Democrat who chairs the House Appropriations Committee. "If they want to cut aid to local governments, then let them be out front with it and not hide behind this problem we're having with the rating houses with our triple-A rating."

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