State maintains top bond rating

AAA status confirmed

praise by analysts comes with warning for future

Candidates dispute significance

July 27, 2002|By David Nitkin | David Nitkin,SUN STAFF

Despite a turbulent economy and slumping tax revenue, Maryland maintained its coveted AAA status from three major bond rating agencies in reports released this week.

The top rating, which means the state can borrow money at low interest rates, was cheered by Lt. Gov. Kathleen Kennedy Townsend, a Democrat running for governor, as evidence that the state's finances were in order.

"This is very, very good news, because what it is saying is Maryland is very strong," Townsend said. "It's not Kathleen Kennedy Townsend saying it, it's the top analysts in the country."

The ratings come as the national economy struggles and state leaders face bleak projections. A poll for The Sun published this week showed that 30 percent of likely voters think the Maryland economy is getting worse, a threefold increase over four years ago.

Rep. Robert L. Ehrlich Jr., a Republican running for governor, has made fiscal issues a cornerstone of his campaign. Poll results show that more voters think he would be better able to handle a looming state budget deficit than Townsend.

Ehrlich said yesterday that he agrees with Comptroller William Donald Schaefer that "we are heading in a bad direction fast," and disagrees with Gov. Parris N. Glendening's assertions that the state is in good economic condition.

"We're in big trouble," Ehrlich said. "If things are so good, how come [Townsend] called for a freeze in state spending?"

The lieutenant governor has called for some cuts and said she would freeze most state spending in her first budget if elected.

While analysts from Moody's Investor Services, Fitch Ratings and Standard & Poor's praised the state's fiscal condition, they warned of trouble ahead.

"In recent months, Maryland's economy has weakened, joining many other states that were affected by the recession before Maryland was," said the Moody's analysis.

The report also warns: "The current forecast shows a tight budgetary picture in 2003, with a large budget gap surfacing in 2004. ... The out-year forecast shows a large budget deficit of $919 million emerging in fiscal 2004 and steadily growing to nearly $2 billion by 2007."

But Moody's said Maryland should be able to manage the deficits: "Unlike many other states, [Maryland] has so far handled its current fiscal situation leaving its budget stabilization fund intact."

Maryland is planning to borrow $531.6 million by issuing general obligation bonds Wednesday.

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