Fitch downgrades Maine bond rating

Glenn Adams, Associated Press
Associated Press

AUGUSTA, Maine (AP) -- Legislative Democrats sought Wednesday to put the best face on Fitch Ratings downgrading of Maine bonds, saying it targets the very issues they are focused on this session.

"Our laser focus on jumpstarting our economy and putting people back to work will show Fitch and others that we are determined to get to work getting results," Senate President Justin Alfond of Portland said.

Citing "persistent budget gaps despite repeated balancing actions," Fitch Ratings on Tuesday downgraded Maine's $472 million in general obligation bonds to AA from AA+. Fitch also downgraded the rating on $1.4 billion of the Maine Municipal Bond Bank's general resolution bonds to A+ from AA-.

Besides the revenue shortfalls lawmakers are almost continually addressing, the New York rating agency said one-time fixes included in the governor's proposed budget for fiscal 2014-15 creates an expectation that future adjustments will be needed.

"The one-notch downgrade on Maine's (general obligation) bond rating reflects its reduced financial flexibility with weak reserve levels and limited options to address a difficult budgetary situation," Fitch says in its report.

Ratings set benchmarks for how much interest companies will have to pay to sell bonds. The higher the grade, the lower the interest rate a borrower — in this case, the state — must pay.

Moody's Investors Service rates Maine general obligation bonds AA2, negative outlook, and Standard & Poor's rates them AA stable, according to the treasurer's office.

State Treasurer Neria Douglass said the rating situation can be improved.

"We can start by issuing the bonds that voters approved in June 2011 and November 2012. The projects voters approved will create jobs and provide the foundation for a better economy," said Douglass.

Gov. Paul LePage has been reluctant to issue voter-approved bonds, saying the state's financial situation must improve first. But the Republican has recently promised to release $105 million in bonds if his plan to pay a state Medicaid debt to hospitals approaching $500 million is approved. LePage has also proposed $100 million in government facilities bonds to build a replacement for the Maine Correctional Center in Windham.

The governor had no immediate response to the Fitch downgrading. But a Democratic leader said LePage's $6.3 billion, two-year budget is part of the problem.

"Governor LePage's current approach to the budget and revenues needs to be more collaborative and less like the obstructionist approach of Republicans in Washington," said House Speaker Mark Eves of North Berwick. Among other things, the budget seeks to suspend revenue sharing to towns and cities for two years and have school districts pay a portion of teacher retirements instead of the state paying it all.

Administration officials have said identified as major budget challenges a loss of federal stimulus funds and rising Medicaid obligations.