The recent political harmony that helped earn Massachusetts an upgrade in September is beginning to show signs of strain.
In the last few weeks, the news from the Massachusetts capitol building has been increasingly hostile from all sides, with almost every governmental player involved.
Gov. William F. Weld has been vocally opposed to a proposed bond sale sponsored by the state turnpike authority. Treasurer Joseph P. Malone, having declared his opposition to a Massachusetts Industrial Finance Agency bond proposal, has also involved himself in a lawsuit against Senate President William F. Bulger. And state legislators are voicing their gripes in the press over term limitations and salary increases for 1993.
Rating agency officials, who took heart this fall when the various factions seemed to be making peace, expressed concern about the possible end of the truce.
"Political squabbling alone won't cause a downgrade," said Claire G. Cohen, executive vice president of Fitch Investors Service Inc. "But it can lead to a logjam that holds up necessary legislation."
Vickie Tillman, executive managing director of public finance at Standard & Poor's Corp., said although politics is a tough business, disagreements can get out of hand.
"To date, Malone and Weld and the legislators have done what is necessary to improve the state's economy," she said. "But when politics stops progress, that can have a disastrous effect.
"Gov. Weld, especially, has been able to improve relations between the executive and the legislative branches," she added.
Officials with Moody's Investors Service did not return phone calls.
The rating officials did not mean to suggest the state is in imminent danger of a downgrade. But they did see the end of harmony as a negative sign for the credit.
Since taking office in January 1991, Weld, a Republican, has worked closely with the Democratically controlled House and Senate.
For the past two years, however, the governor has wielded a powerful weapon: just enough Republicans in the state House to assure that a veto could not be overridden. But starting Jan. 1, when the next session begins, he will no longer hold the necessary margin.
At that time, the balance in the Senate will be 31 Democrats and 9 Republicans.
It will now be up to Democratic legislative leaders -- especially the Senate president and Speaker of the House Charles Flaherty -- to curb the power they have regained and continue to work with Weld.
This will not be easy. Bulger and Flaherty are arguably the two most powerful men in the state. But for the state to continue to recover, cordial relations will be necessary.
On Dec. 13, 1989, Standard & Poor's downgraded Massachusetts to BBB, its lowest investment-grade rating because of the state's continually declining economy. Moody's followed suit when it downgraded the state on March 19, 1990, to Baa. Fitch did not downgrade the state from its previous A rating.
Pointing to the many financial burdens on the state, including high unemployment, fleeing industry, and devalued real estate, ratings officials then and now said political infighting contributed to a lack of financial reform.
Both Cohen and Tillman said that by the end of former Gov. Michael Dukakis' administration, there was no communication between the two branches of state government about what was needed to solve the state's problems.
They were quick to note, though, that while politics was not the main reason for the downgrades, it did preclude the creation of policy reform.
When Weld took over in January 1991, the two branches set aside their problems to focus on returning the state to its role as a viable municipal market participant.
On Sept. 9 this year, both agencies upgraded the state's rating to A. They cited a return to fiscal stability as one reason for the upgrade, but also cited the administration and legislature's desire to work together as a major reason for the improved rating.
"Now it is the responsibility of both branches to continue working together," said state Director of Debt Finance Chris Alberti yesterday. "Despite the occasional political squabbles, the branches have continued to work together."
Alberti's position demands that he keep in almost constant contact with ratings officials. The governor's office referred all questions on this matter to him.
Alberti said "come hell or high water," an economic summit is held every week between the governor, the lieutenant governor, the speaker, the Senate president, and the heads of the two houses' Ways and Means committees.
Although occasionally tenuous, the partnership between the governor, the treasurer, and the legislature has been a critical part of the state's financial recovery.
"At the end of the Dukakis administration, the prevailing emotion in the state was bitterness," said Peter Lucas, spokesman for Flaherty. "Weld and the legislative leaders have been able to successfully couch those sentiments."
"Political conflicts will always exist in state government," said Karen Serieka, spokeswoman for Malone. "But that does not preclude the strong commitment we all feel in the Weld administration towards fiscal responsibility."
Ratings and government officials agree that as Weld enters into what promises to be a tough 1993 reelection campaign, he will find it increasingly difficult to set aside all political differences.
But for the developing recovery to continue in the state, it will be crucial not to forget what has already been accomplished.
"In 1992, they have done exactly what is necessary to restore confidence in the state's ability to support their debt," Tillman said. "We have no concern as of yet. But in 1993 that same cooperation will be integral."
Cohen said, "When political discord merges toward the financial area, then it's a concern."