Moody’s Investors Service has released a more detailed look at why it upgraded Maine’s credit outlook from negative to stable, citing a steadying economy, consistent state revenues and curbed spending for education and health care.
The Moody’s report cites private sector job gains as a sign that the state’s economy is recuperating, though at a pace that is slower than the national recovery.
The Moody’s report noted that while Maine’s jobs recovery has lagged the nation, growth has been well distributed across education, health care, leisure and hospitality and professional services sectors.
The recovery hasn’t been so well distributed across the state, however. An analysis by the Maine Center for Economic Policy found one in five of the jobs added in Maine since the end of the recession has been in the Greater Portland area.
Alongside a look at slow but steady economic growth, the Moody’s report delves into the political, writing that its analysts “believe the political willingness exists to renew” measures like a reduction to state revenue sharing with cities and towns, postponing a statutory requirement to provide 55 percent of all funding for K-12 education and reducing benefits and decreasing health care coverage through MaineCare.
Postponing a hike in state education funding for essential programs and services saved $250 million in the last two-year budget, the Moody’s report stated, helping to close a $755.5 million gap.
Looking at state revenue, the assessment also assumes the Legislature will maintain its increase on sales tax passed last year through the 2016-2017 two-year budget.
The analysis also said the state’s elimination of cost-of-living adjustments for public pensions stands in its favor, reducing the amount of the state’s unfunded pension obligations. A credit analysis delivered earlier this month from Standard & Poor’s also cited that pension change as a positive for the state’s credit rating, but cautioned that it may still face legal challenges through an appeal that is now before the First Circuit Court in Boston.
Moody’s analysis also touches on the challenges and potential benefits of growth in Maine’s population over 65, which is projected to increase faster than the rest of the nation. That trend, the report said, stands to boost demand for health care services and employment in that sector, but also put pressure on the state’s health care budget.
And while the share of younger people in the workforce is expected to decrease, the report states there are benefits to the state budget.
“The flip side of an aging population is that slower growth in younger cohorts will relieve stress on the primary education budget,” the report states.
The report also stated Maine’s ratio of debt to all personal income ranked favorably with other states. Maine ranked 30th-largest on that measure. Ranked by how much the state pays for debt service, Maine ranked higher at 19th, which Moody’s attributed to a 10-year payment schedule for its general obligation debt.
That payment timeline increases short-term costs, but “will enhance Maine’s long-term fiscal health,” the report stated.