Massachusetts Gov. Charlie Baker's proposed $39.6 billion
The budget Baker proposed to state lawmakers forecasts slightly higher fund balances at fiscal end 2016 than the state's November disclosure statement, and projects strong 4.3% revenue growth in fiscal 2017.
"The governor is proposing to use favorable revenue growth to make further reductions in the state's structural budget deficit and modestly increase reserves in fiscal 2017," S&P said in a commentary, while adding it will examine the budgetary trends more closely after the state enacts a budget.
S&P and Fitch Ratings rate the commonwealth's general obligation bonds AA-plus. Moody's Investors Service rates them Aa1.
Massachusetts now projects a smaller draw down in reserves during fiscal 2016 than it disclosed in November. State officials attributed slightly improved projected revenue and a reduction in forecasted expenses.
S&P said that while General Electric last month did not cite taxes as the primary reason for its planned relocation of its world headquarters from Fairfield, Conn., to Boston, state revenue trends reflect a favorable business environment.
"Nevertheless, the state is facing some headwinds, including what we view as high debt and pension liabilities," said S&P. Spending by MassHealth, the commonwealth's combined Medicaid and State Children's Health Insurance Program, consumes more than one-third of the budget, and is projected to increase 5% in fiscal 2017. That's faster than state revenue, though slower growth than in previous years, said S&P.
