On the eve of the beginning of legislative review of Governor Paul LePage's proposed supplemental budget, Fitch Ratings issued a statement downgrading Maine's General Obligation bonds from AA+ to AA. Reasons cited include the ongoing Medicaid budget mismanagement and weak projected growth. Fitch's also noted that "The governor recently proposed a major bonding initiative that could substantively increase the state's debt load."
Fitch release included:
"CONTINUED BUDGET PRESSURES BALANCES: The downgrade reflects the state's persistent budget gaps despite repeated balancing actions. Another sizable imbalance emerged for the current year with revenue underperformance exacerbated
by growing Medicaid costs. The administration's proposed mid-year adjustments include several one-time measures.
The one-notch downgrade on Maine's' GO bond rating reflects its reduced financial flexibility with weak reserve levels and limited options to address a difficult budgetary situation. Economic forecasts reviewed by Fitch indicate
the state's economy will remain in a slow-growth mode, which is likely to limit revenue improvements. The 'AA' rating assumes that while the current-year gap solutions may include limited one-time measures, the next biennial budget will
follow the state's historical pattern with primarily sustainable and recurring solutions. Fitch notes that the state faces an increasingly contentious decision-making environment. "