With a bond offering pending in two weeks, Massachusetts Gov. Deval Patrick and other officials are making pitches to the three major credit agencies to improve the state’s bond rating.
“We have a great story to tell,” Patrick said late Wednesday after he, Treasurer Steven Grossman, and other financial and political leaders met separately with teams from Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s.
Moody’s rates Massachusetts general obligation bonds Aa1, Fitch rates them an equivalent AA-plus, and Standard & Poor’s rates them AA.
“When we look them straight in the eye, we can not only say we would appreciate an upgrade, but we think that we earned one,” Grossman said after meetings that Senate President Therese Murray, D-Plymouth, hosted in her office.
The treasurer, though, was realistic. “I’m not expecting, necessarily, that we’ll get an upgrade because it’s such a skittish environment,” he said.
Grossman cited improvements in pensions and municipal health care, and the commonwealth’s intention to earmark $300 million of its $460 million surplus for its reserve fund. Such a move, which lawmakers must approe, would make Massachusetts the fourth state with a contingency fund exceeding $1 billion.
By the end of September, the state expects to borrow about $440 million, or one-fourth of its capital budget plan. Grossman said he expects to receive ratings on those bonds by the end of next week.
Grossman also said the state would not need revenue anticipation notes in September. He anticipates seeking $800 million of the short-term notes as early as October.
Robin Prunty, a managing director for public finance ratings at Standard & Poor’s, said states often take good, hard looks at themselves amid difficult times.
“You frequently see policies evolve to address revenue cyclicality,” she said. “In periods following other recessions, we have seen a focus on reserves and other budget-related policies.”
Nick Samuels, a vice president at Moody’s, praised the Bay State but said obstacles remain. The state’s pension funding ratio is 67.5%, based on an Oct. 1, 2010, valuation.
“Massachusetts carries among the highest debt loads among states and they have a relatively low level of pension funding,” he said. “There are significant fixed costs. While pension changes will help, it will be a challenge for Massachusetts to improve these over time.”
Northeastern University economics professor Alan Clayton-Matthews told the rating agencies that the state’s educated work force will help it adjust more quickly to an innovation-oriented economy than other states.
“Massachusetts has outperformed the nation and the recovery to date,” he said in a presentation.
“The state has a slower-growing population than the U.S. and slower-growing employment. However, output growth often matches or exceeds that of the U.S. and over the long term, U.S. and state output growth has been virtually identical, and is expected to equal that of the U.S. over the next 10 years.”
