“If we do not progressively replenish our reserves now, we will pay the price and any downgrade will impact nearly everything we do,” said Massachusetts Treasurer Deborah Goldberg.

BOSTON – Massachusetts should protect and boost its reserves to preserve its bond ratings, state Treasurer Deborah Goldberg told lawmakers in Boston.

"If we do not progressively replenish our reserves now, we will pay the price and any downgrade will impact nearly everything we do," Goldberg, a Democrat elected in 2014, said at Monday's consensus revenue hearing of the House and Senate ways and means committees at the State House.

The annual hearing essentially jump-started the fiscal 2018 budget process.

Last year, Republican Gov. Charlie Baker and lawmakers agreed on a $39 billion spending plan. The commonwealth canceled a $200 million deposit to the stabilization, or rainy-day fund, in an effort to balance last year's budget.

A $294 million deficit still opened up as of the end of October. A $175 million reduction in projected tax revenue and $119 million in funding shortfalls accounted for the gap.

While Massachusetts projects $1.3 billion in its rainy-day fund by the end of 2017, the state "could reduce that to the extent that it is not able to address the remaining shortfalls," said S&P Global Ratings.

Goldberg cited warnings from S&P three weeks ago before the commonwealth's roughly $700 million general obligation sale. S&P in November 2015 had lowered its outlook on Massachusetts GOs to negative from stable.

"A year later, although the rating remains the same, the message from S&P is more direct about what needs to be done to avoid a rating change," said Goldberg.

S&P, while affirming its AA-plus rating, chided Massachusetts for suspending transfers to the stabilization fund.

"Massachusetts continues to face midyear downward revenue revisions and spending pressures that have resulted in small budgetary gaps and reduced fund balances, even if the budget stabilization reserves have remained fairly stable," said S&P. "Management's decision to suspend these transfers shortly after adopting them, despite positive economic performance, is viewed negatively from a credit standpoint."

Fitch also assigns Massachusetts its AA-plus rating while Moody's Investors Service rates the GOs an equivalent Aa1. Both assign stable outlooks.

Eileen McAnneny, president of the nonpartisan watchdog Massachusetts Taxpayers Foundation, warned about the uncertainty of a Donald Trump presidency.

"The Trump campaign offered many promises and few details, leaving enormous uncertainty about what changes are likely when the new president takes the oath of office in January," she told lawmakers Monday. "With Republicans controlling both houses of Congress, we can anticipate a marked departure from the policies of the past eight years."

According to McAnneny, policy changes that could reshape Massachusetts' economic environment include repeal of the Affordable Care Act; converting Medicaid to a block grant program; immigration overhaul that would lead to further workforce contraction; or protectionist trade policies that could affect pricing or demand for manufacturing or professional services sectors.

The foundation expects the sluggish growth in tax revenues to continue in fiscal 2018. Tax revenues, it said, will increase by $687 million, or 2.65%, to $26.64 billion. It does not include estimates of one-time corporate tax settlements exceeding $10 million in its revenue forecasts.

Baker and Goldberg are scheduled to speak Wednesday at the commonwealth's sixth annual investor conference at the Boston Convention & Exhibition Center.

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