BOSTON -- The economic performance of the six New England states has, more or less, mirrored the overall national recovery.
While the economies of Massachusetts and New Hampshire appear to be the healthiest in the region, certain states and industries are still lagging, and much work remains to improve the finances of the entire region, a number of rating agency Officials say
But even those states that continue to show signs of economic weakness are starting to turn things around, the officials said.
For example, while Connecticut, perhaps the hardest hit of all the states in the New England region, has not yet shown much job growth, the job loss rate seems to have slowed, the rating officials agreed.
Because the region is still in the early phase of an economic recovery, rating officials have been reticent to change ratings this year.
"We are seeing exactly the kind of growth you would expect at this point point in a national economic recovery," said Renee Boicourt, a vice president and assistant director at Moody's Investors Service. "Most of the states appear to be proceeding fairly prudently after this recent recession."
But Boicourt cautioned against overreacting to states' progress after the recession by overinflating ratings.
Economies react to different recessions in different ways, Boicourt said. After the national recession of the early 1980s, no one expected the economy to expand as rapidly as it did, she said.
Richard Larkin, managing director at Standard & Poor's Corp., said he does not expect an economic expansion in New England to rival the one during the 1980s.
"At the peak of that expansion, the states in New England had an average rating of double-A-plus," Larkin said. "Now those same states average a double-A-minus. There's more work to be done because this was a much longer, deeper recession."
During the recession, the state that suffered the most rating damage in the region was Massachusetts. Now, though, analysts say the recovery may be the strongest in Massachusetts.
The state's rating during the downturn was hurt not only by severe job losses during the recession, but also by the constant bickering between the executive and legislative branches.
During the last few years of former Gov. Michael Dukakis' administration, the Democrat and his party's powerful leadership in the legislature wouldn't talk with each other long enough to stave off the state's economic problems.
As a result, Massachusetts was handed the lowest ratings in the nation during the early 1990s: BBB by Standard & Poor's, Baa by Moody's, and A by Fitch Investors Service.
After Gov. William F. Weld took office in 1991, the executive and the legislative branches were on better terms, and the ratings have risen.
So have the number of permanent jobs in the state, which suffered greatly during the recession. Earlier this month, the U.S. Commerce Department reported that the Massachusetts unemployment rate declined during September to 5.2% from 5.9% in August. The national rate was reported at 5.9% during September, the lowest rate since October 1990.
Currently, Massachusetts is rated A-plus by Fitch and Standard & Poor's and A by Moody's,
"Massachusetts is seeing the effects of the recovery and appears to be doing fairly well now," Larkin said. "There have been a lot of fiscal improvements in the state, but there is still a high debt burden."
Larkin also said that Massachusetts is helped by having Boston within its boundaries.
The city "is the central point of not just Massachusetts but the entire region," he said.
Larkin said a $1.2 billion improvement plan for Logan Airport by the Massachusetts Port Authority will help the city and the airport continue to play a vital r01e in the region,
Improving the transportation in and out of the airport will also be necessary, he said. Currently, access to Logan from downtown Boston can be a nightmare.
One other bright spot for Massachusetts is that economic growth is starting to emerge in the central and western parts of the state.
"We are just starting to see a consistent trend to better economic times in the whole state," said Lowell Richards, director of debt management for the state. "Most of our economic improvements have been in the Boston area, so it's good to see it spreading throughout the state."
Richards said, though, that it will be important for Massachusetts to keep a tight rein on how much debt is issued. He said that the state has the third highest debt burden per capita in the nation.
Several analysts said Massachusetts' and Rhode Island's heavy debt burdens will have to be closely monitored during the next few years.
Boicourt said that since Rhode Island was downgraded by Moody's during 1992, there have been few significant changes in the state's economic picture.
The state's general obligation bonds are rated AA-minus by Standard & Poor's and Fitch and A1 by Moody's.
"Rhode Island is plagued by the lack of a real strong economic base to reinvent themselves," Boicourt said. "The state still has a somewhat archaic manufacturing sector that runs on its own cycle."
She said that the state's debt burden was worsened by "the half billion dollars needed to bail out the state's banking disaster."
The long-term effect of the banking crisis on the state is still uncertain, but the state's economic recovery has not been what state officials expected.
"Rhode Island's monthly reports are harder to draw conclusions from," said Claire G. Cohen, executive vice president at Fitch. "For the first quarter of this fiscal year, they expected their revenues to grow at a rate of 5.4% and got growth of 3.5%."
Although officials in Rhode Island, including outgoing Gov. Bruce G. Sundlun, hope to increase revenues through casino gambling, Larkin said that casinos might not be the best horse to bet on.
"I look at casinos as, in the long run, being revenue-neutral," he said. "There is a saturation point for these types of facilities."
The rush for casinos in New England has been fanned by the success of the Foxwoods Casino in Ledyard, Conn.
During 1993, Foxwoods reportedly earned about $800 million for the Mashantucket-Pequot Indian tribe. Of that, Connecticut received $100 million.
There are now plans to build a casino or two in Massachusetts and one in Rhode Island.
Most of the rating officials said that even with the $100 million from Foxwoods, Connecticut still has the most work to do economically in New England.
During the recession, Connecticut received a triple dose of bad news. Slowdowns in the defense industry, insurance industry, and the financial services industry crippled the state's workforce.
Boicourt said that Connecticut's recovery will have to resemble California's. It will not be enough to simply regenerate the businesses that were hurt during the recession, it will be necessary to reinvent the state's economy, she said.
Fortunately, the state has been helped and will continue to be helped by the new revenues generated by the state's personal income tax, she said. The state appears to be holding the line on spending, and if the increased revenues allow Connecticut to call some of its outstanding deficit bonds, it would be viewed as a good sign by the rating agencies, Boicourt said.
Although Massachusetts and Connecticut have attracted most of the analysts' attention during the recession and the recovery, the region's three northern states have also made some strides.
"New Hampshire actually looks like it is improving at the quickest rate of all the states in the region," Larkin of Standard & Poor's said. "The state has a low debt burden and a diverse economy."
Larkin also said that the state is helped by a well-educated workforce and the continued development of high-tech firms.
New Hampshire's real estate industry, decimated during the recession, is finally starting to show growth. As the economic climate improves in Massachusetts, New Hampshire will obtain residual benefits, Larkin said.
He said that New Hampshire will also benefit by ongoing improvements to Pease International Airport. He said it is a good sign to see increased private uses for the former military base.
Robert Kurtter, a vice president at Moody's, said that New Hampshire, Vermont, and Maine will be helped by an increase in tourism.
For the first time in five years, the three states had a full and snowy ski season last winter. Kurtter said this helped increase revenues and also spurred people's interest again in purchasing second homes in those states.
"During the recession, people were more concerned with putting the food on the table of the house they had," he said. "But now that things have improved, the market for second homes has started to show some life."
He said the rebound has been more pronounced in New Hampshire than in Vermont or Maine, which is lagging the other New England states in recovering from the recession.
Boicourt said that although revenues in Vermont continue to be slightly below estimates, the state is showing some degree of improvement. She said, though, that Vermont is continuing its tradition of lagging most of the other states in the region as far as economic improvements or declines go.
"Vermont is showing some better prospects for growth," Larkin said. "However, a lot of the new jobs that are generated in the state are lower-paying."
Maine, another state dependent on tourism, is also recovering slowly from the recession, although the state could be helped by another good winter, Cohen of Fitch said.
"Last year was a very good tourist year for the state," said Kurtter. "But the other main industries in the state, namely shipbuilding and forestry, continue to be fairly weak."
