Maryland’s long-standing reputation for top-tier financial stability took a hit this week as Moody’s Investors Service downgraded the state’s bond rating from AAA to Aa1.

The action marks the first time Maryland has fallen from the highest credit rating tier in over three decades. This shift could significantly affect Maryland’s borrowing costs and financial outlook, and signals growing concern over the state’s long-term fiscal stability.

With higher interest rates likely for future bond sales, the cost of funding public projects — including schools, transportation, and critical infrastructure — could rise, placing additional strain on state and local budgets.

A Legacy Interrupted

For more than 30 years, Maryland maintained its prized “triple triple-A” rating from Moody’s, Standard & Poor’s, and Fitch. The downgrade by Moody’s ends that legacy, reducing the state’s status among a select group of only 14 states that held the highest rating across all three agencies.

Standard & Poor’s and Fitch have yet to issue updates, but the decision from Moody’s signals growing concerns over Maryland’s fiscal stability.

Why the Downgrade?

Moody’s pointed to Maryland’s growing structural deficits as a significant driver behind the downgrade. In the 2025 session, Governor Wes Moore and legislative leaders attempted to address the state’s projected $3.3 billion deficit through spending cuts, cost shifts to local governments, and new taxes and fees.

Despite these measures, Maryland’s heavy reliance on federal funding, particularly, is vulnerable to recent federal budget cuts, exacerbating concerns. The state’s exposure to federal job losses and agency downsizing has only deepened its fiscal challenges, contributing to Moody’s decision.

As previously reported on Conduit Street, Moody’s downgraded Maryland’s credit outlook from stable to negative last year, signaling potential trouble ahead.

At that time, the agency specifically cited concerns about the state’s dependence on federal jobs and shrinking federal budgets. Those risks have only grown under the current administration, pushing Maryland’s bond rating down to Aa1.

Higher Borrowing Costs Ahead?

Maryland’s upcoming bond sale, scheduled for June 11, will likely reveal the immediate impact of the downgrade. A lower bond rating typically drives up interest rates on state borrowing, raising the cost of public infrastructure projects.

This shift could strain capital improvement plans and force difficult budget choices for a state that has long prided itself on low-cost borrowing for schools, roads, and community facilities.

State Leaders Respond

Governor Wes Moore, Lieutenant Governor Aruna Miller, Treasurer Dereck Davis, Comptroller Brooke Lierman, House Speaker Adrienne Jones, and Senate President Bill Ferguson released the following statement on Moody’s Credit Rating:

 

To put it bluntly, this is a Trump downgrade. Over the last one hundred days, the federal administration’s decisions have wreaked havoc on the entire region, including Maryland. Washington, D.C. received a credit downgrade. Thousands of federal workers are losing their jobs. Actual and proposed cuts to everything from health care to education will continue to exact an incalculable toll on Maryland and states across the country.

As our people deal with the repercussions, our proximity to the nation’s capital makes us particularly vulnerable to this administration’s reckless policies. We are proud of the work that Maryland residents who are federal workers provide to our nation, and we are disgusted that the Trump Administration continues to indiscriminately fire these dedicated public servants.

Last week, we met with Moody’s to discuss our collective work protecting the full faith and credit of the State of Maryland. Together, we turned a deficit into a surplus, gave the middle class tax relief while still raising critical revenue through strategic tax reforms, and reduced spending by over $2 billion – the largest amount that’s been cut in a Maryland state budget in 16 years. Maryland’s creditworthiness has only been strengthened by our collective work on this budget.

Over the last two years, Maryland has seen strong economic momentum. We’ve created nearly 100,000 jobs, seen some of the lowest unemployment rates in the nation, and experienced one of the fastest job growth rates. Yet, this was not enough to overcome a downgrade caused by the recent actions of the Trump Administration.

As Moody’s acknowledged, state actions ‘closed a budget gap although the need for further corrective steps may arise directly from federal funding cuts or the economic consequences of federal layoffs and other policy shifts, to which Maryland has a very high degree of exposure.’

Maryland still holds one of the highest possible credit ratings in the nation, and as we have for decades, we will always pay our debts. We have taken proactive steps to protect our people and fortify our state in the face of federal headwinds. And together, we will continue to answer crisis in Washington with courage in Maryland.

Stay tuned to Conduit Street for more information.

Previous Conduit Street Coverage

Moody’s: Federal Cuts Put Maryland’s Economy at Greatest Risk

Conduit Street Podcast: Budget’s In the Books…Now What?

State Slashes Revenue Projections by $280M Amid Federal Retrenchment

DC’s Deepening Local Fiscal Crisis Spells Trouble for Maryland