Moody’s: $80M Funding Denial Worrisome For County Creditworthiness

The recent state decision not to spend $80 million that the Maryland General Assembly had fenced off for specific budget areas may have an impact on counties’ credit, reports The Baltimore Sun.

The “fenced off” sum included $25 million for education costs, including $19 million to help most of the state’s local school systems cover the cost of employee pensions, and $6 million for the Aging Schools Program, a program that helps maintain and renovate older public school buildings. Reports The Baltimore Sun,

Moody’s, one of the nation’s three large bond rating agencies, said Thursday that the governor’s refusal to spend the money the General Assembly allocated for teachers pensions and aging schools is a “credit negative” for 21 counties and the city.

Moody’s noted that its credit negative finding is not a downgrade of its ratings of the affected jurisdictions’ bonds but it can be a factor in future decisions. The agency made no comment on the state’s Triple-A bond rating, which remains unchanged.

Three counties most heavily affected by the decision — Baltimore, Montgomery and Howard — all retain their top ratings, Moody’s said. Baltimore city has Moody’s third-highest rating, which also remains unchanged.

While the budget became law when passed by the General Assembly, the $80 million portion of the budget at issue was redirected from the Governor’s appropriation to the State’s “Rainy Day” Reserve Fund. Budget language required the Governor to either spend all or none of it. On April 4, MACo sent the Governor a letter requesting that he release the funding, emphasizing the importance of the above-mentioned $25 million for public education. Citing state revenue weakness, the Administration recently announced its decision to withhold the funds for the full range of items.

See Conduit Streetprevious coverage on this ongoing issue here: