Maryland’s latest credit reviews preserved the State’s top-tier rating but also raised new concerns about long-term fiscal pressures and future budget sustainability.

Maryland retained its top-tier credit standing this week as Fitch Ratings affirmed the State’s AAA issuer and general obligation bond ratings and assigned a AAA rating to $800 million in new GO bonds.

At the same time, S&P Global Ratings also assigned a AAA rating to Maryland’s new 2026 GO bonds and affirmed the State’s existing AAA general obligation debt.

The ratings reaffirm Maryland’s strong credit profile and ability to borrow at favorable rates. For counties, those ratings matter because the State regularly finances significant capital projects through GO bonds, including school construction and other infrastructure investments that support local communities.

Maryland’s GO bonds carry the State’s full faith and credit pledge and represent one of the most closely watched measures of fiscal health.

Both rating agencies pointed to Maryland’s diverse economy, strong reserves, disciplined financial management, and broad ability to raise revenues as strengths supporting the State’s highest credit rating.

Fitch highlighted Maryland’s “extremely strong” operating performance and cited well-funded reserves, long-term financial planning, and a history of budget adjustments when needed. The agency also pointed to Maryland’s significant federal presence, including agencies, contractors, and military facilities, as a stabilizing force for the State’s economy.

But while Fitch maintained a Stable Outlook, S&P took a more cautious step and revised Maryland’s outlook to Negative from Stable.

S&P did not lower Maryland’s AAA rating. However, the agency warned that growing budget pressures and concerns over long-term structural balance could eventually affect the State’s credit profile if policymakers do not make timely adjustments.

The outlook change reflects concerns that Maryland faces increasing pressure from spending commitments and future budget gaps. S&P stated that the State could face a downgrade if it does not establish a sustainable path back to structural balance while maintaining adequate reserves.

Those concerns align with broader fiscal discussions already underway in Annapolis. The Department of Legislative Services projects a fiscal 2027 structural shortfall of roughly $598 million, growing to approximately $2.6 billion in fiscal 2028 and more than $3.4 billion by fiscal 2030. DLS also projects ongoing spending growth averaging 5.6% annually, outpacing projected ongoing revenue growth of 3.5%.

Fitch also highlighted some of those same pressures, identifying education and Medicaid as Maryland’s largest long-term spending commitments. It specifically cited the expansion of education funding obligations as a potential future risk if recurring revenues do not keep pace with spending growth.

DLS similarly projects that budget pressures will increase beginning in fiscal 2028, as Blueprint costs exceed available dedicated Blueprint revenues, requiring greater General Fund support to close future structural gaps.

Fitch also highlighted Maryland’s pension obligations as an area to watch, noting elevated long-term liabilities relative to many states, though still manageable relative to Maryland’s broader economic base.

Bottom line: Maryland kept its AAA rating, but S&P’s outlook change adds another sign that long-term fiscal pressures continue building. Projected deficits, growing spending obligations, and future funding demands will likely keep many of this year’s budget debates on the table in the years ahead.

Stay tuned to Conduit Street for more information.