Massachusetts got another boost on its return to fiscal health yesterday when both Standard & Poor's Corp. and Fitch Investors Service Inc. upgraded the state's general obligation debt to A-plus from A.
The ratings change affects about $6.5 billion of GOs and $2.1 billion of related state agency and other debt.
Massachusetts is still rated A by Moody's Investors Service. Moody's is currently reviewing the state's rating.
"The most important benefit of this bond upgrade is that employers will see further evidence that Massachusetts is a good place to do business," said Gov. William F. Weld at a press conference. "We should not forget that a bond upgrade is only a symbol of the progress we have made."
Both ratings agencies said the state's overall position has improved, and saw the upgrade as a good sign.
"The most notable factor that helped the state's rating was the dramatic reduction in the amount of short-term debt it needs," said Richard Larkin, a managing director at Standard & Poor's. "This fiscal year, it is predicted that the sate will have to sell about $65 million in short-term notes. A few years ago, that figure was over $1 billion."
Notes were used to plug the operating deficit in the state's budget in 1990 and 1991. The state's 1994 fiscal year began on July 1, 1993.
Larkin also said that although the state's budget is tightly balanced, there were no "outlandish" one-shots used to achieve that balance.
The upgrade comes as the state is readying for its first competitive general obligation sale since that fall of 1989.
The state is planning to sell $200 million of GOs on Oct. 19. The deal is expected to comprise serial bonds maturing in 1994 through 2013. [TABULAR DATA OMITTED]
"As you can imagine, we are ecstatic about this," said state Treasurer Joseph D. Malone. "This is a real vote of confidence to the policies of the last two and a half years."
Malone said that although the upgrade is a good sign, "It is also a reminder that we have to stay the course."
With the economy slowly starting to improve, he said, the state can move on and try to improve the state's unfunded liabilities.
"The major thrust of this upgrade surrounds the fact that the state has worked very hard to improve its financial situation and create a stronger reserve position," said Claire G. Cohen, executive vice president of Fitch. "They have made it through this nasty recession and things are starting to slowly improve."
Both Malone and Larkin said it will be critically important for the state to continue to create jobs.
"The state has moved to the upper end of the A rating, but there are still some substantial burdens left to overcome," Larkin said. "Most states are in the double-A range, so there's still room for improvement."
Since 1988, the state has cut its payrolls from 80,000 to 65,000. The state used a combination of early retirements and cutbacks to achieve this reduction, especially in the area of human services.
Weld said he hopes to be able to begin putting those people back to work. "The overriding goal of all of us in state government must continue to be the creation of jobs for the people of Massachusetts," the governor said.
Standard & Poor's said the state's outlook remains stable, reflecting the fact that the debt ratio should continue to remain high over the next 10 years. Also, the regional recession that has plagued New England the last four years looks to be reversing itself slowly, the rating agency said.
During the mid-1980s the state was in the midst of the so-called "Massachusetts Miracle." Unemployment was at an all-time low and industry was booming. But by 1988, Massachusetts led the entire region into its worst economic slowdown since the Great Depression.
Massachusetts suffered more deeply than any other state, though. From early 1989 until the summer of 1992, total employment fell 11.2%, according to Standard & Poor's.
Before September 1992, Massachusetts was the lowest-rated state credit in the nation. It was rated BBB by Standard & Poor's, Baa by Moody's, and A by Fitch.