Despite the widely acknowledged comeback staged by Massachusetts this year, the state's financial officials cannot rest on their laurels, Gov. William F. Weld said yesterday.
"The market's recent expressions of renewed confidence are very encouraging to us," Gov. Weld told a group of about 250 attending a New York Municipal Forum luncheon at the Downtown Athletic Club. But, he also said, "We know that we must remain diligent in maintaining fiscal stability."
When he and state Treasurer Joseph D. Malone took over this year, Massachusetts confronted an $850 million budget deficit in fiscal 1991 that was expected to grow to about $2 billion this fiscal year.
But the state managed to balance its budget for fiscal 1991 and enter fiscal 1992 with $770 million in budget cuts, for a budget 5.6% less than the preceding said, made Massachusetts the only state actually to enter fiscal 1992 with real budget cuts.
For the first quarter of the current budget year, the state took in $2.23 billion, $203.5 million more than the $2.03 billion originally expected, according to the state's Department of Revenue.
Rating agencies appreciate the newly balanced budget. On Sept. 12, as Massachusetts prepared to market $523.7 million of GO bonds, Standard & Poor's Corp. revised the outlook for Bay State bonds to "stable" from "negative," though Massachusetts GOs still carry a BBB, the lowest state rating in the nation.
Moody's Investors Service also gave its lowest state GO rating -- Baa -- to the state's GO debt, in September, but it remarked that "efforts to address underlying budgetary imbalance offer the prospect of greater financial stability in the future."
Fitch Investors Service, which has steadfastly held to an A rating for Massachusetts, said the state's "financial developments have been largely positive." Nevertheless, the rating agency characterized prospects for the state's bonds as "uncertain" because of a number of tenuous budget balancing proposals such as asset sales.
Gov. Weld acknowledged privately that the rating agencies need some time before they can push the state's ratings back up the slope down which they careened starting in 1989.
Cathy Daicoff, a managing director at Standard & Poor's Corp., said her agency is indeed "waiting to see that the [fiscal 1992] budget is achievable, and to see what the 1993 budget looks like."
But already, Gov. Weld said yesterday, the state's finances have begun to revive the market for its $10 billion of tax-supported debt. In September, the state's 7% bonds were reoffered to yield 7.10%, only ten basis points off the market for A-rated bonds, according to data cited by the governor.
John F. Wallace 3d, a managing director at the Bank of Boston who attended the luncheon yesterday said Mr. Weld is guiding the state "into phase two." "They have stemmed the tide of red ink," Mr. Wallace said. "They're in a pro-active mode rather than a reactive mode."
That new mode, Gov. Weld said, will consist of fiscal innovations including corporate tax credits, a Berlin trade mission, privatization of services, mandatory monthly business plans from state agencies, development of a five-year capital planning, and a cap on annual borrowing.
Mr. Malone, who also spoke, said the state wants to limit its use of short-term debt. Under Mr. Malone's predecessor, Robert Q. Crane, the state was "abusing" its commercial paper program, Mr. Malone said. He also said new short-term debt austerity policies will limit this year's short-term borrowings to $400 million in commercial paper and $100 million in notes.
One source said Mr. Malone is expected to hold a press conference today to name Eric M. Turner, formerly of Drexel Burnham Lambert Inc., to head the state lottery. It was not clear who might take over Mr. Turner's current post as the state's deputy treasurer for debt management.