Md. keeps top bond rating

July 12, 2008|By Laura Smitherman | Laura Smitherman,Sun reporter

Wall Street analysts reaffirmed yesterday Maryland's coveted AAA bond rating, even as Comptroller Peter Franchot released tax revenue figures showing sagging finances.

The three major bond-rating agencies - Fitch Ratings, Moody's Investors Service and Standard & Poor's - gave Maryland the AAA rating in advance of the state's $415 million bond sale planned for next week, according to state Treasurer Nancy K. Kopp. The top rating, a sign of confidence in the state's financial stewardship, typically means the state can obtain lower interest rates, saving taxpayers money. Maryland has never had anything but a AAA rating.

Meanwhile, Franchot warned Gov. Martin O'Malley and legislative leaders in a memo that tax and other revenue collections "are now clearly lagging expectations," particularly the sales tax. "The situation is deteriorating, and there is no indication that the slowdown in revenue growth has reached a bottom," Franchot wrote.

Sales tax receipts grew nearly 12 percent in June based on May sales, but after adjusting for a recent rate increase, baseline receipts declined about 6 percent, according to the comptroller. In addition to turmoil in the housing market, consumers have been saddled with rising prices for food and energy. While those commodities are generally not taxed, consumers are left with less money to spend on other taxable goods.

Lottery sales also declined 6 percent in June, with Keno and Racetrax sales falling almost 20 percent for the month, probably because consumers are feeling the squeeze at the gas pump and grocery, Franchot said in the memo.

Fiscal analysts warned state lawmakers this week that a decline in tax and other revenue precipitated by a slowing economy could leave a $200 million shortfall by the end of the current fiscal year. Budget Secretary T. Eloise Foster said last month that state officials might be forced to make spending cuts because of the bleak economic outlook.

Proceeds from the bond sale will cover construction at public schools and jails, as well as grants to local governments and nonprofit institutions for hospitals and other projects.

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