One of the nation’s top rating agencies has downgraded its outlook for Maine bonds because of the state’s continuing budget problems, especially Medicaid spending, and its lack of reserves.
Moody’s Investors Service on Friday lowered its outlook from stable to negative for the state’s $498 million in general-obligation bonds.
The company maintained its rating of Aa2, third-highest, on the debt and assigned the same to $55.8 million of general-obligation bonds the state plans to issue, Moody’s said Friday in a statement. Maine plans to issue the debt on May 31 for capital projects, Moody’s said.
Moody’s notes in the statement that Maine’s employment growth was for all intents and purposes flat in 2011, compared to a national growth rate of 1.1 percent. The agency also pointed to problems with Maine’s demographics, as well as potential issues with how cuts to state spending may affect specific parts of the economy.
“A weak demographic profile, including slow population growth, an aging work force, and out-migration of younger residents will challenge the state over the medium term,” Moody’s wrote. “While the health care jobs have been an economic driver over the course of the recent recession, the state’s efforts to reduce spending on social services, especially Medicaid, may reduce future growth prospects for that sector.”
The rating agency said the negative outlook reflects Maine’s “recurring challenges” on the spending side of its budget, “primarily in the Department of Health and Human Services which includes Medicaid.” The agency also saw problems with minimal budget stabilization fund balances — commonly known as a rainy day fund — and a “weak general fund liquidity position reflecting the lack of reserves.”
Charles Colgan, an economist with the University of Southern Maine’s Muskie School of Public Service, said this move by Moody’s is really a signal more than anything else.
“Practically, I don’t think it means very much — it’s really a signal to bond investors that one day in the future the rating might be downgraded — but it doesn’t say anything about whether or when that may happen,” said Colgan.
Colgan noted that Moody’s is concerned about the ongoing DHHS issues, demographics and other challenges that are not new.
“What they’re basically saying is if you want to invest in the state of Maine’s bonds, be aware these sorts of things are going on when you price them,” said Colgan.
So will this mean Maine pays more to borrow money through bonding? Colgan said the state isn’t doing much bonding now, though the Legislature has just approved a $96 million package. If the bond proposals pass the governor’s desk and are later passed by voters in November, the earliest they’ll go on sale is early winter, Colgan said.
“Between now and then, a lot can happen,” he said.
Colgan, who served 12 years in the Maine state planning office in the past, including a stint as Maine State Economist, said in years past, when these sorts of warnings were sounded, state officials would make trips down to New York to talk to the bond raters and make sure they understood the Maine economy.
“This was a long time ago — in those days, Moody’s and Standard & Poor’s tended to look at the Maine economy as nothing more than lumber, fish and potatoes. We had to go down and do a fair amount of educating about the realities of the Maine economy,” said Colgan. “It may be that state officials want to tell a different story to the raters before they do their next review.”
In a release Friday, State Treasurer Bruce Poliquin said his office over the last several months has lead a team of state government officials in discussions with the national rating agencies to update Maine’s credit rating.
“I’m pleased that Moody’s Investors Service has affirmed Maine’s solid Aa2 credit rating. This rating will continue to give investors confidence in the quality and security of our general obligation bonds. Our office anticipates strong demand at the May 31 bond sale,” Poliquin said in the release. “I appreciate the helpful guidance from Moody’s as Maine continuously strives to improve its credit rating. I note that Moody’s recognized the positive financial impact of state government eliminating $1.7 billion of our unfunded public pension liability last year. This year, the rating agency acknowledges the long-term financial health of our ongoing initiative to right-size our Medicaid program.”
In the Moody’s statement, the rating agency noted that Maine’s revenue performance is “tracking slightly over budget” while the state’s unemployment rate of 7.2 percent is below the nation’s 8.1 percent.
The rating reflects the state’s “manageable debt levels; improving revenue performance; the resolution of recent budget shortfalls with largely recurring actions; and pension reforms that have improved the state’s funded ratios and lowered the annual required contribution,” Moody’s said. “Debt ratios are below the 50-state medians and debt is scheduled for rapid retirement within 10 years.”
BDN writer Matt Wickenheiser contributed to this report.
True & very sobering http://online.wsj.com/article/BT-CO-20120517-716961.html
My question is how much of this is attributable to the computer systems which carried so many medicaid ineligibles incurring a huge expense of repayment to the Feds and how much is fundamentally about trying to stretch our health and human services programs to be more inclusive than we can really afford to be?
How much of this is really about the hugely costly blunder of carrying the ineligibles for so long?
We cannot fund growth and rebuild infrastructure without a good bond rating
But I am concerned that this very serious downgrade in our rating not be used to make cuts that are really not needed in core and essential health and human services.
It would be nice to see some “numbers” on this.
Agreed Lindsay. That’s why the Legislature’s recent passing of over $95 MILLION in new Bond’s is an act of almost supreme maddness. And that fact that LePage went along with this, despite his supposed position of cutting Gov’t spending, is just another sign of just how screwed up things are in Augusta. Get the current outstanding Bond’s paid off and then start the process of Bonding again , but this time with some serious and sober thinking done in the process. Dumb as it may sound, it’s time that Maine went back to the basic’s of elementary school math and started to run Maine’s finance’s like we all do at the kitchen table when we go grocery shopping and do the monthly budget.
Hey Mike..this sounds like good advice..didn’t Maine ‘s legislature see this downgrade coming..didn’t they know that we aren’t in a position to be looking for $95 million in new debt.
What’s the path for getting “we the people” more tuned into this?
In my view, the legislature will just keep doing what it has always done, long before LePage became our Governor, unless we the people wake up and start telling them what we want them to do. When we are invisible and voiceless ( through our failure to engage) they have only each other and all those other influences to refer to.
The time to fix up this bond package is now..immediately. Trim out everything that isn’t truly essential, including these we’d love to have but can’t afford right now and get real.
First, please re-read the article. The “rating” was affirmed. The “outlook”, i.e. the 6-12 month view of future events, has changed from stable to negative because not enough is being done to reduce MaineCare spending and create reserves.
And second, while the Bond package was approved by the government it still has to be voted on in a Referendum by the state’s voters. If the voters think borrowing more debt is desireable than that is their choice. The issue as to whether it is a prudent and responsible thing to do will be testimony to the quality of their judgement. If the history of bond referendums during the past decade is any indication the answer is no.
Someone, please, find and check on Barbara Merill’s availability to run as an Independent in the next General State Election’s. Cutler may be nice but has absolutely no idea as to just what is going on in Maine aside from his Log House deal he made last fall wih the Chinese. Barbara has the ‘smart’s’ to know what to do, who’s really involved and what’s needed to get things under control, especially in the financial area’s. It’s time that Maine, as a whole, put the days of Jock, Angus, ‘Baldy’, and shortly, Paulie, behind us and decide to move forward. Anything less is going to make thing’s worse. And Maine’s citizen’s, both current and our children, deserve better. What’s so tragic is that Maine’s current crop of elected official’s don’t, or won’t, see it.
In a very quick and hurriedly digested search I found these two pieces which answer my own questions about the legsilatures awareness of the cirtical siutaion with Maine’s reserves. Both affirm the wisdom of your comments.
http://bangor-launch.newspackstaging.com/2009/07/22/politics/state-reserves-depleted-jobless-rate-on-rise/
Kevin Miller BDN 2009 “State Reserves Depleted, Jobless Rate on Rise”
“We are in a position now, much as when this
administration came in the door, of having no reserves,” state Controller
Edward Karass told members of the Legislature’s Appropriations and Financial
Affairs Committee.
Karass urged the committee and, in a separate
letter, Gov. John Baldacci to make rebuilding those reserves a top priority”
So it is clear that Baldacci kept us on this very unwise path of allowing continually depleted reserves , the legsilature was warned by State Controller Karass..no one listened and well, now we have it.
The State Controller’s comments imply this began in the adminsitration of Angus King..hat Baldacci only inherited a depleted reseve that Angus King built.
(Thank you BDN for covering that..Thank you Kevin Miller..obviously a healthy 4th estate can’t carry the ball to touchdown all by itself .. “we the people” have to then send out the cry and team up to make the touchdown)
Before the vote was taken on this $95 million bond pacakage, Jody Harris warned the legislature that they had been warned before before they voted
.
http://bangor-launch.newspackstaging.com/2012/05/04/opinion/risky-business-bill-puts-maines-credit-rating-on-the-line/
In February, Fitch Ratings Inc., one of the most
influential credit rating agencies, changed its outlook for Maine’s
creditworthiness from “stable” to “negative,” putting the state on notice that
our high AA+ rating is in danger of being downgraded. Fitch warned that their
rating “is dependent upon the state’s ability to … meaningfully rebuild
reserves depleted during the recession.”
Unfortunately, the Legislature’s Appropriations
Committee is considering a bill, LD 849, that would jeopardize Maine’s credit
rating by doing the very thing Fitch warns against”
Jody Harris is a policy analyst with the Maine Center for Economic Policy
And they went right ahead and voted anyway.
(Again thank you BDN for trying to raise the warning flag)
So now that we now the consequences of this just passed bond package, shouldn’t we all write to our represetatives and ask them how they voted, what they tried to do to protect our credit rating. ( No good writing to Brian Langley.but I will anyway and also to Walter Kumiega, my rep.)
Good question for all now in the legislature seeking higher office.what was their input on this; what was their vote on the bond appropriation? .Did anyone even raise the issue of our bond rating?
Perhaps if you took the time to read the sorry history of Maine’s failure to develop reliable computerized billing and eligibility computer systems you would realize the failure lay in the DHHS committee which oversaw the design of these systems and selected the vendor who provided them. The fed bailed out the Baldacci administration with $25 million; and now we find out the current vendor is in trouble in Idaho.
You astounding ignorance is getting rather annoying!….this isn’t that complex, although the system dynamics and flowcharts of data flows are daunting, it isn’t the computer’s fault but those of the designers.
Your language isn’t very civl , espceially for an orgaic gardener but I have actually spent quite a bit of time and efort following what happened with the computer system and know that the main problems did originate in the Baldacci era..more or less right of the box.
My question was whether the DHHS error on inelgibility contributed to the downgrade and the specific mention made by Moody’s or whether the flaw is in an overly ambitious helath and human serviices program that we just can’t afford. I’d be interested in your thoughts on that. I am wondering why and what specifically Moody’s was pointing to in their comments about DHHS medicaid.
”
You astounding ignorance is getting rather annoying!….this isn’t that complex,”
I am sure organicgardener is far more experienced and much better prepared to comment on matters involving finance, banking, risk management and the credit rating agencies. I mean really, who would have more experience in the finance sector, an organic gardner or someone who had spent 10 years in the formulation of banking standards and regulations on the New York State Banking Board?
Very kind, my friend, but I think we all have some where inside us “common sense”and common wisdom” and I hope I speak from that and assume that is there in others.
I gather that the subject of the computer system errors at DHHS are very close to organicgardener somethow and that he/she assumed there was something more to my question other than the straight forward question it was and is. to my inquiry about what exactlty Moody’s was pointing to in our DHHS system.
I believe organicgardener has been a fellow poster at several discussions on that system but perhaps didi’t notice or notice that I have consistently pointed ut this all began a long tiime ago under Baldacci.
It was a screw up of monumental proportions, and loss of perhaps $100m.
You’re welcome to have a crack at designing a better one, start here: http://www.themainewire.com/wp-content/uploads/2012/03/DHHS-Enterprise-Applications-Diagram-Final-Draft-v169.pdf
Way too often on these boards people make assumptions about someone’s political leanings based on what that person has said about a particular politician. What a lot of posters fail to realize is that blind acceptance of any politician simply because their ideology happens to fall in line with the one you hold is not in all cases a wise thing to do. I happen to know John Baldacci from growing up in Bangor. Having said that I most certainly would not defend him or his shortcomings based simply on that fact. The Baldacci administration had many screw-ups , the computer system at DHHS being only one of them. The one I will never forgive is the selling, at what I consider bargain basement prices, of the State’s liquor monopoly. As far as the DHHS computer system is concerned, we are one of 50 States. Each State has a dept similar to our DHHS, not all of them are having computer problems. Why hasn’t someone who claims to be as business savvy as the current resident of the Blaine House contacted the States with computer systems that do the job and enlisted their experts to fix Maine’s problem? It certainly isn’t because he hasn’t spent time with Governors from other States. As citizens of The United States and The State of Maine not only should we question the actions of our elected officials we have a duty to do so.
The system vendor was replaced at the end of the Baldacci regime and Gov. LePage got ‘stuck’ with it and the terms of contract.
I suggest you read this comparison of Maine with N.H.:HHS computer system 3 years behind schedule – NHBR.comwww.nhbr.com/…/hhs-computer-system-3-years-behind-schedule.ht…Oct 8, 2010 – Three years after deadline, $61m HHS computer system remains behind schedule … through its bidding process, Maine took the low bid on a new Web-basedsystem provided by an untested vendor and it proved a disaster.
As is often the case, we are on the same page.
Perhaps, someone who designed and installed automated medical billing systems for 15 years; and for whom organic gardening is a lifelong passion.
That would be wonderful if the subject was medical billing systems. This article was about the downgrading of Maine’s credit worthiness by a rating agency. You deflected away from the subject matter of the article very artfully.
Perhaps you forgot the original thread: ”
My question is how much of this is attributable to the computer systems which carried so many medicaid ineligibles incurring a huge expense of repayment to the Feds and how much is fundamentally about trying to stretch our health and human services programs to be more inclusive than we can really afford to be?”
the irony is that the current computer system was certified by the Obama administration for Medicaid billing; yet there is still the vexing problem of eligibility at time the service was delivered, and retroactive coverage or denial when it changes. Eligibility is done separately and apparently in batches, so there is a lag time when it changes. From what I know, most if not all of the people were eligible at some time and then became ineligible.
Moody’s ratings are based on available revenue to pay debts, and unobligated revenue. Paying claims in a timely manner given all the outstanding ones may be a factor.
Fraud is endemic in this program, as skyrocketing cases now being found testify.
So limited reserves, and fluctuations in revenue, and unknown obligations based on unpaid provider claims resulted in a lowered rating.
“Moody’s said it could cut Maine’s rating if significant budget gaps appear in current or future budgets, or if no clear plan to resolve reserves problems emerges. A slower-than-average economic recovery that hinders revenue growth could also trigger a downgrade, it added.” WSJ
yes, so I understand that the sudden mismatch happened because one system was mandated by the feds and the other system didn’t hook up with it.
Thanks for the WSJ quote..wish it were more specific on exacyly what Moody’s said about Maine’s medicare expenditures.
It sounds like it’s time to cut more taxes……………….or cut the bloated prohibition budget. We just can’t afford all this expensive babysitting much longer.
Congratulations Republicans.
By the Republican budget, the state doesn’t have enough money coming in (reserves) to cover potential expenses. So now we have to pay higher interest rates on money borrowed.
The rush to cut taxes (again), reducing revenues and reserves, is now going to cost us more for every infrastructure repair paid for through government bonds.
The GOP buzz-word this year is “structural budget changes”. Now it’s clear that aside from putting thousands more of our neediest neighbors at risk, they’ve damaged the “structure” as well. An infamous two-fer. The worst of both worlds.
Where is our tax dodging, unconstitutional State Treasurer, Bruce Poliquin while his-Wall Street friends are downgrading our state’s credit worthiness on his watch????
Maine’s spending for Medicaid is about 1800-1900 per person. The national average is 1100-1200. Combine that with Maine’s low ranking economically (more than likely due to high taxes) and you expect low interest rates?
The question I have asked a few legislators, and never gotten an answer on, is how much of that disparity is based on Maine having the second oldest population, and how much of it has to do with how many people are on the benefit. It would seem reasonable that if we had the second oldest population, we may, in fact, have more people on the benefit, costing taxpayers more.
Pfft2..that’s at the heart of my question too..thanks. How much of what we spend is truly essential and justified as a stat like that suggests it might well be.?
And what exactly was Moody’s pointing to with their comment on DHHS. I would like to know what they meant..what they were saying has to be fixed to impotve our credit rating. This way it just seems to be an open door to excuse and justify very deep cuts in essential services.
Where is our tax dodging, unconstitutional State Treasurer, Bruce Poliquin while his-Wall Street friends are downgrading our state’s credit worthiness on his watch????
Running for Senate.
Cliffordmc..thanks for that..that’s very interesring.. is that historically true that Maine’s medicaid spending is that much higher thann the national average? What about compared to ther states with a similar ranking on poverty indicators.?
Very weak attempt at subterfuge .Trying to pin the blame on Conservatives for the dried up Rainy-day Fund or for high Medicare spending is laughable, LOL type laughable .
Read the headline pal…MEDICAID SPENDING IS ONE OF THE CAUSES….repubs aint to blame…40 years of dems are.
Jason Powerfully expressed..you should post this as a letter to the editor so all BDN readers get to see it. Eloquent, clear right to the heart of it. Thank you.
Let’s not forget Governor LePage’s $150MILLION TAX CUT of last year’s budget!!!!
Re-read the proportions of who received the biggest tax breaks over the $15 Million over 2 years… and it wasn’t lower working Main Street.
Moody’s downgrades Maine’s bond rating on Poliquin’s watch.
Bruce seems to be willing to take credit for things others have accomplished but he won’t take responsibility for the one thing under his control.
Ethics? We don’t need no Stinkin’ Ethics…..
I’d love to see a nationwide chart of downgrades since the TPers took over in 2010.I’m sure it’s a lot longer list than upgrades.TP FAIL again.
So, we’ll just give more tax breaks to the wealthy and they’ll create jobs for all of us. I can see easy street now! Just imagine. What will really happen is that the tax cuts take place and our bond ratings will be in the dumps (like Juniper Ridge or Dolby)
The State has 498 millon out in bonds. (1.3 millon people) Aprox. 45 dollars per person
The city of Bangor has over 90 millon out in Bonds.(35 thousand people) Aprox. 3200 dollars per person.
The state got the better deal…
Thank God Bangor has a Fiscally Conservative as a Mayor or we might have owed more in the last 2 years.
so Davidvsgoliath..what’s the message?.That if we had made better decisions with the debt we incurred bond after bond we would have grown out of our problems and rebuilt our reserve? Is that what happened?
To me it says we not only didn’t make restoring our reserves a priority but that we didn’t use our borrowing wisely ..that our investments didn’t pay off for Mainers ( and we are not just talking post 2008..this goes WAYYYYY back.)
Lindsay I was trying a little Humor.. I am well aware that for the past 30 or so years that I have been paying attention to politics that if the State had 100 millon laying around for a rainy day fund, there was a battle of the Reps on which district was getting pork… I remember the fights amoung the libs on where to spend it. It was funny…but not real funny. It was like throwing fries out for the pigeons at McD’s..
DavidvsGoliath,
So we have not been making good growth producing, job producing investments with our bonds and along the way have spent our “savings” down to dangerous levels?
It’s been all pork and no cohesive strategy for growth?
Gosh, do you think Sprucedweller or Bangorian have read this one? The other observation is that lower ratings directly translate to higher borrowing costs so the tax dollars don’t go as far. When is Maine going to wake up?
Excellent and well made point clamcove1!!! A lower bond rating translates directly to higher costs for taxpayers.
It s the entire culture of the legislature that needs fixing.
And it is up to us to change that, not just by who we elect but by becoming more engaged ourselves and makibg sure hat the ship pf state is onn a course “we the people” set.
LePage doesn’t believe in reserves. And, he doesn’t believe in planning for the future. He acts like there is no future.
for him, there isn’t. Go back to Jamaica, Paulie
How many years under dem rule and giving the freebies
away? I say cut taxes even more then the recipient class
will just have to ask Obama for some of his stash.