AUGUSTA, Maine (AP) — Legislative Democrats on Wednesday sought to put the best face on a rating agency's downgrading of state bonds, saying it targets the very issues they are focused on this session.
"Our laser focus on jumpstarting our economy and putting people back to work will show Fitch (Ratings) and others that we are determined to get to work getting results," said Senate President Justin Alfond, of Portland.
Fitch Ratings, citing "persistent budget gaps despite repeated balancing actions," on Tuesday downgraded Maine's $472 million in general obligation bonds from AA+ to AA. Fitch also downgraded the rating on $1.4 billion of the Maine Municipal Bond Bank's general resolution bonds from AA- to A+.
The ratings system runs from a high of AAA, representing top quality and reliability, down to D, representing defaults on obligations or likely defaults.
Besides the revenue shortfalls lawmakers are almost always addressing, the New York ratings agency said one-time fixes included in the governor's proposed budget for fiscal 2014-15 create an expectation that future adjustments will be needed.
"The one-notch downgrade on Maine's (general obligation) bond rating reflects its reduced financial flexibility with weak reserve levels and limited options to address a difficult budgetary situation," Fitch says in its report.
Ratings set benchmarks for how much interest companies will have to pay to sell bonds. The higher the grade, the lower the interest rate a borrower, in this case the state, must pay. Democratic leaders, however, said that the Fitch downgrade will not affect future bonds and shouldn't ratchet up interest the state will pay to investors on existing bonds.
Moody's Investors Service rates Maine general obligation bonds AA2, negative outlook, and Standard & Poor's rates them AA stable, according to the treasurer's office.
State Treasurer Neria Douglass said the rating situation can be improved.