Massachusetts will kick off 2019 with a big GO deal

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Massachusetts intends to ring in the new year with a $965 million fixed-rate general obligation bond sale.

The commonwealth plans to sell $915 million of Series A tax-exempt new money and refunding bonds and $50 million of Series B taxable bonds on Jan. 8, Deputy Treasurer Sue Perez said.

The institutional sale will follow a Jan. 4 and Jan. 7 retail period, Perez said in Monday's investor call, the commonwealth's third and final of the year.

Bank of America Merrill Lynch is the bookrunner.

The issuance follows a busy second half of the calendar year for the commonwealth. Since August, it sold competitively $1.5 billion of revenue anticipation notes and, through negotiated sales, $726.6 million of GO new money and refunding, and $225.0 million of Commonwealth Transportation Fund new money.

Fitch Ratings and Moody's Investors Service rate Massachusetts GOs AA-plus and Aa1, respectively. S&P Global Ratings assigns its AA rating, having downgraded the commonwealth from AA-plus in 2017.

S&P at the time cited the failure by state officials to follow through on rainy-day replenishment despite economic growth above the national average and through prolonged expansion.

The commonwealth has since made a net deposit of $463 million to raise its balance to just over $2 billion for the first time since 2008.

Fitch affirmed its rating Tuesday, saying it "reflects its considerable economic resources, strong budget controls and a record of careful financial management."

Massachusetts is the second-wealthiest state by per-capita personal income, 131% of the U.S. average in 2017. Its economic fundamentals, said Fitch, include "significant strength in the healthcare, technology and education sectors, leaving it well positioned for solid gains."

Massachusetts is among 14 states that received straight As from the Volcker Alliance in fiscal 2015, 2016, and 2017 for reserve funds, one of five budgetary categories the organization uses in its annual report card on the states. That contrasts with the commonwealth's across-the-board D-minus marks for legacy costs.

"Those lowest possible grades signal that the dual challenges of amassing cash reserves and fully funding retirement obligations may be increasingly hard to meet in coming years," Volcker said in its latest report.

Massachusetts also did poorly in Volcker's budget maneuvers category, with a three-year C average.

"Its efforts to attain budgetary balance included a variety of techniques that put pressure on future years," said the alliance, which cited $19.7 million in deferred payments for its Medicaid program, MassHealth, to fiscal 2018 from the prior year.

The state fared better in budget transparency, with its B average reflecting best disclosure practices in maintaining a consolidated budget website and publishing information about tax expenditures and debt.

Massachusetts’ lack of disclosure of deferred infrastructure replacement costs depressed the grade, according to the report.

For the fiscal 2019 capital budget, Gov. Charlie Baker increased the administrative bond cap to $2.34 billion from $2.26 billion. His second term will begin in January.

Baker signed a $41.2 billion fiscal 2019 operating budget -- up by 3.2% for the previous fiscal year -- on July 26.

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