NEW YORK - Standard & Poor’s revised its outlook on Maine to stable from negative and assigned a AA to $53 million of general obligation bonds the state is scheduled to price on Thursday.
“We revised the outlook based on our view of Maine’s significant progress in reducing its accumulated, unreserved general-fund deficit and unfunded pension liability in fiscal 2011,” S&P analyst Ken Rodgers said in a report released Friday.
The AA rating, which was also affirmed on the state’s outstanding GOs, reflects Standard & Poor’s view of Maine’s improving economy, strong fiscal policies and practices, moderate debt and other liabilities, and adequate liquidity for the rating.
“While these developments are encouraging, MaineCare, the state’s Medicaid program, continues to face operational and fiscal challenges,” Rodgers noted.
On May 17, Moody’s Investors Service revised its outlook on the state in the opposite direction — to negative from stable.
In a report, Moody’s said the negative outlook reflects Maine’s recurring challenges on the spending side of its budget, including Medicaid, as well as minimal budget stabilization fund balances and a weak general-fund liquidity position.
Moody’s assigned a Aa2 to the new GO bonds and affirmed the rating on approximately $498 million in outstanding debt.
“The Aa2 rating is supported by Maine’s manageable debt levels, improving revenue performance, the resolution of recent budget shortfalls with largely recurring actions, and pension reforms,” Moody’s analysts said.
Maine Treasurer Bruce Poliquin said in a statement that he’s pleased that Moody’s affirmed the “solid Aa2 credit rating.”
“I note that Moody’s recognized the positive financial impact of state government eliminating $1.7 billion of our unfunded public pension liability last year,” he said. “This year, the rating agency acknowledges the long-term financial health of our ongoing initiative to right-size our Medicaid program.”
Fitch Ratings does not rate the bonds.
Maine is expected to issue $15.6 million of federally taxable Series 2012A bonds and $36.9 million of Series 2012B bonds on May 31 in a competitive offering.
During the late spring of each year, Maine typically borrows money in order to fund capital projects such as road and bridge construction and repairs, according to the Maine treasurer’s office.
“Our office anticipates strong demand at the May 31 bond sale,” Poliquin said.
Bond counsel is Edwards Wildman Palmer LLP and financial advisor is Public Financial Management Inc.
The Series A bonds will mature in 2013 through 2015 and the Series B bonds will mature in 2015 through 2022. The bonds will not be subject to redemption.
Maine lawmakers and voters approved the bonds during past years. This year, the Legislature has approved a $96 million debt package for the coming year, but Gov. Paul LePage has yet to sign off on the bonds.
LePage, who has voiced concerns about issuing more debt, has until Tuesday to act on the bond issues. If he does not veto the bill, it will go on to Maine’s voters in November.
