Governor’s credit ratings claims ignore Maine’s precarious financial position

April 28, 2015 by

“The governor may tout his health care policies as good for the state . . .  But he is wrong. And Maine’s “AA” credit rating from Fitch, which is worse than it was in 2012, proves it.”

by Christy Daggett and Garrett Martin

When you apply to borrow money for a new house, a car, or some other purpose, you know that lenders will carefully weigh your credit rating before making their decision. In general, the less risk you pose, the less it costs to borrow money. The same is true for state governments, which typically borrow money to invest in roads and bridges, clean water systems, land conservation, business development, and other priorities. Earlier this month, Maine received its most recent credit rating from Fitch Ratings. Maine scored a “AA” rating which basically means that the state is a reasonably safe credit risk for lenders. Maine did not regain the “AA+” rating it lost in 2013, and that means lenders will likely charge the state higher interest on the funds we borrow.

Never wanting to miss a chance to beat the “anti-welfare” drum, the governor was quick to circulate a press release that claimed credit for Fitch’s observation in its credit report that “Maine has not seen significant mid-year budgetary pressure from the state’s Medicaid program.” And Maine Department of Health and Human Services commissioner Mary Mayhew continues to cite the report to justify the administration’s assault on the state’s social safety net.

It is ironic that Governor LePage would even call attention to Maine’s credit worthiness, since his refusal to secure the bond funds for voter approved investments in our state’s economy is well documented. The governor is misleading Maine people when he says that our credit rating is buoyed primarily by his assault on “welfare,” which amounts to cutting thousands of people off Medicaid, rendering them uninsured and putting their health at risk.

In fact, what wins the top ratings from Fitch and other nationally recognized statistical rating organizations is job growth, broad-based revenue, and predictability. On all three counts, Fitch raises serious concerns for Maine.

On job growth, the report states:

“…the state’s…recovery has significantly lagged. Through January, the state regained just over 36% of the jobs it lost during the recession, which is the weakest recovery amongst the states…”

Posting “the weakest recovery amongst the states” is not something to crow about.

On revenue and predictability, the report raises concerns about the governor’s current budget and tax proposals:

“The phase-in of income tax reductions continues into the following biennium, which could pose budget challenges for the state.”

And income tax cuts that “could pose budget challenges for the state” is not exactly the message the governor wants to hype when he is proposing to eliminate the income tax altogether.

While the administration deserves some credit for managing the state’s Medicaid program to limit the need for additional funding outside the typical two-year budget process, this hardly makes the case for his policy to terminate Maine people’s health care and cast them onto the charity of financially foundering hospitals.

Instead, we can consider how Maine’s credit worthiness might improve but for the governor’s refusal to accept federal Affordable Care Act (ACA) funds to increase health care access as a majority of states have done. One good example is Ohio, which is accepting billions of dollars of federal ACA funds and also received an “AA” rating from Fitch. Another Fitch analysis conducted in February found that states expanding Medicaid have seen substantially faster job growth in the healthcare sector, “suggesting that ACA expansion is generally positive for that sector’s employment profile.”

The governor may tout his health care policies as good for the state. He may think that his refusal to invest in Maine’s economy by signing off on voter-approved bonds is sound. He may believe that proposing a budget that creates a revenue shortfall in future years is fiscally responsible. But he is wrong. And Maine’s “AA” credit rating from Fitch, which is worse than it was in 2012, confirms this.

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