There was a half-decent chance that Standard & Poor's would cut the credit ratings of Maryland and Virginia in the wake of the agency's decision Friday night to cut the United States from AAA to AA+. Both states, also rated AAA, depend heavily on federal spending for their economies and their fiscal budgets. S&P said Friday it will make more pronouncements on credits related to the U.S. government today:
On Monday, we will issue separate releases concerning affected ratings in
the funds, government-related entities, financial institutions, insurance,
public finance, and structured finance sectors.
Here's Comptroller Peter Franchot talking to WBAL TV: "We in Maryland have always paid attention to putting our fiscal house in order. We have a AAA bond rating that we've worked really hard for, but it's probably going to be taken away, through no fault of our own," Franchot told 11 News.
But Megan Eckstein, of the Frederick News-Post, quotes Sen. David Brinkley saying the Senate Budget & Taxation Committee was told that S&P will not cut Maryland at this time.
UPDATE: S&P doesn't seem to have said anything to Maryland in the last few days. But Warren Deschenaux, the General Assembly's chief budget analyst, said that he doesn't expect a Maryland downgrade because S&P has not put the state on notice that it might get dinged and because Maryland doesn't need to sell new bonds until probably next year.
"S&P is not taking action against us at the present time," Deschenaux said on the phone this morning. "If they haven't" put Maryland on notice for a possible downgrade, "they're probably not going to do that in the near term," he said.
Although the state still has a large structural deficit, Deschenaux was upbeat about the effect of the debt-ceiling deal on the state's near-term prospects. The cuts to federal spending won't really kick in for a couple years, he said. "All the things that are good about Maryland are still good."
It's possible S&P could put Maryland on notice for a downgrade or even pull the trigger. But Deschenaux said he doesn't expect that.