Despite the publicity accorded to the Northeast's fiscal problems over the last three years, the region was in even worse shape during the 1970s, according to a report Standard & Poor's Corp. published yesterday.
"Although credit ratings in the Northeast U.S. have been particularly hard hit by the recession and other economic factors," the rating agency said in a news release, "overall credit quality is better now than it was."
The study was published in yesterday's edition of CreditWeek Municipal, a weekly collection of rating agency reports, and it came as the second in a series of regional economic reports.
"Overall," the agency said in its news release, "the region's credit ratings have deteriorated more slowly than its economy."
Two of the region's largest cities are now rated better than they were after the last recession, having reached credit rating nadirs in 1981. Boston, now rated A by Standard & Poor's, sank to BBB-plus in 1981, when New York City bottomed out a BBB. Current ratings on the cities are A and A-minus, respectively.
And one Northeast State, the agency noted, has a better Standard & Poor's rating now than it did in the recent past. New Hampshire's current AA is better than the AA-minus it received in 1983, but not as good as the AA-plus rating it garnered in 1986.
Massachusetts's decline from AA-plus in February of 1988, to its current BBB, symbolizes an era when New England's wealthy states suddenly met the twin sons of the economic recession: slim tax revenues and fat tabs for government programs.
Those factors should continue to dominate indefinitely, according to the rating agency. "The recession will end eventually," the Standard & Poor's report says, "but the spark that will start the economy running again is not yet in sight."
Claire G. Cohen, executive managing director at Fitch Investors Service, said that, on balance, the current economic scenario is more troubling than the last one. In one sense, the governments are insulated, she noted.
"When the '75 recession hit, you had a long period of economic decline going before," she said. "Here, with the 1990s recession, you were coming off phenomenal growth so that the abruptness of it is just staggering."
But the current recession, according to Ms. Cohen, poses a more serious threat because state and local governments, wary of overtaxed voters and burdened by spending mandates, such as Medicaid, have fewer options than in the 1970s.