On the Record with Bruce Poliquin: Moody’s affirms Maine’s credit rating


Agency remains cautious about Medicaid costs

While Moody’s Investors Service has revised its outlook on Maine from stable to negative, Treasurer Bruce Poliquin reported to The Maine Wire that the agency has affirmed the state’s strong Aa2 credit rating.

A rating of Aa2 tells investors that Maine offers high-quality bonds with very low credit risk.

Despite the shift in outlook, Poliquin emphasized that Moody’s has maintained the state’s Aa2 rating. “It’s not a downgrade,” he told The Maine Wire, adding that there will be no adverse financial impact on the taxpayers.

Poliquin said the most important factor is that Maine’s credit rating has not changed. “We’ve retained our credit rating,” he said. “The outlook went from stable to negative because the credit rating agencies need to see us continue to improve controlling our Medicaid spending. In a nutshell, that’s what it’s all about.”

After watching the state’s expansion of Medicaid (MaineCare) for years, Moody’s is looking for sustained improvement, Poliquin said in an interview with The Maine Wire. “Now they are saying: Once you’ve started, we need to see you continue to go down that path, we need to see continued improvement in controlling Medicaid costs,” he said.

Poliquin said Moody’s recognizes that since Governor LePage’s new leadership team took the reins, Maine has “right-sized” spending on Medicaid programs, put aside revenue for the Budget Stabilization Fund (rainy day fund), eliminated $1.7 billion in pension debt and paid off some debt to the hospitals.

“Government has been in many ways unaffordable,” Poliquin told The Maine Wire. “But we have continually proven that we have reduced government spending, and we’ve reduced the budget. We are not taking on any more liabilities, and we paid off some of the hospital debt last year.”

Moody’s has also seen Maine’s progress in addressing long-term structural liabilities in pension funds. “Eliminating $1.7 billion in pension debt allows us spend $200 million less per year for the next 17 years until it is paid off,” Poliquin said. “We got very high marks for that.”

Despite the change in their outlook, Moody’s gives the LePage Administration credit for starting to deal with Medicaid costs, Poliquin said. “They mentioned several times that Maine’s Medicaid costs have been going on many years,” he told The Maine Wire. “They gave us credit because this is the first time that Maine is dealing with the structural deficit.”

Over the past several months, the Office of the State Treasurer has led a team of state government officials in discussions with the national rating agencies to update Maine’s credit rating.

During the late spring of each year, Maine state government typically borrows money by selling bonds to investors in order to fund capital projects such as road and bridge construction and repair. In preparation for the bond sale, the state seeks credit updates from the rating agencies.

On May 31, the Office of the State Treasurer is planning to sell $55 million of general obligation bonds that were approved by the Legislature and Maine voters during past years.  The interest and principal payments to bondholders are secured by the full faith and credit of the state.  There is approximately $490 million of outstanding Maine general obligation debt.

In affirming its Aa2 credit rating, Moody’s cited Maine’s credit strengths, including its manageable general obligation debt level; rapid 10-year pay back of such borrowing; gradually increasing tax revenues; strong internally managed Treasurer’s Cash Pool; and recent reform to its public pension plan for teachers and state employees that reduced future annual payments from the state’s General Fund.

Moody’s change to negative outlook reflects Maine’s recurring challenges for the Department of Health and Human Services spending, primarily for its Medicaid (MaineCare) program; modest Budget Stabilization Fund (rainy day fund) balance; negative General Fund unassigned balance; and slower than average economic recovery—all of which strains the state’s financial liquidity position.

“I’m pleased that Moody’s Investors Service has affirmed Maine’s solid Aa2 credit rating,” Poliquin said. “This rating will continue to give investors confidence in the quality and security of our general obligation bonds. Our office anticipates strong demand at the May 31 bond sale.”

Poliquin said he appreciates the helpful guidance from Moody’s as Maine continuously strives to improve its credit rating.  “I note that Moody’s recognized the positive financial impact of state government eliminating $1.7 billion of our unfunded public pension liability last year,” he said. “This year, the rating agency acknowledges the long-term financial health of our ongoing initiative to right-size our Medicaid program.”

The LePage Administration is committed to creating a business-friendly environment to attract capital investment and private sector jobs, Poliquin said. “This goal of long-term prosperity for Maine citizens is based on restraining state government spending; reforming public entitlements while maintaining important safety nets based on national averages; addressing long-term financial liabilities; lowering energy costs and health insurance premiums; streamlining business regulations; and investing in public education and infrastructure,” he said.



  1. At the coffee shop debate this morning my contribution was  Obama’s answer to all problems. “What we inherited from the previous administration was worse than we thought.”

  2. Treasurer Pouliguin is quite right. For now, Maine’s bond rating hasn’t changed, but …

    Both Fitch Ratings and Moody’s Investors Service have recently announced that their outlook on Maine’s credit worthiness has changed. Fitch went from “satisfactory” to “negative” in February. Moody’s announced it’s change from “stable” to “negative” last week. And this shift isn’t new or limited to these two ratings agencies.

    Standard and Poor’s, last October, observed “We view [Maine’s] lack of a formal and detailed capital planning process as a constraining factor.”

    This administration has been fixated on two things: Cutting costs and slashing taxes, but building reserves to make badly needed improvements in roads,
    utilities, education and other key ingredients of a strong economy doesn’t happen that way. Revenues are critical and blindly cutting taxes does not further capital requirements needed to sustain a premium bond rating.

    When three civil engineers tell you your foundation is pretty shaky, it’s completely inappropriate to respond that you’re pleased that it’s still standing.

  3. and that’s EXACTLY what Willard Romney will say within 48 hours of his ‘presumptuous’ inauguration

    thinking anything will change under Romney makes about as much sense as the tired, irrational liberal argument for wealth redistribution…

  4. LOL….nice quote from S&P.

    Unfortunately Mr. Johnson, debt is NOT capital and what you have termed as a “reserve” is no more of a reserve than what is ‘reserved’ in the Fed Reserve vaults….fiat currency and bank credits.  Bonds, or promissary notes to pay at a future date, does not constitute capital or a reserve, but rather the mere admission that you have failed to adequately manage the wealth of your state up to the current point in time and now need a bank to bail you out of your shortcomings….with interest of course.

    When three civil engineers tell you your foundation is pretty shakey because it was built 60 years ago on borrowed money and you have failed to maintain the infrastructure along the way (mostly because you failed economically and misallocated resources), it is completely inappropriate to respond that is the responsibility of the next generation to shoulder the debt burden that YOUR generation accrued.

  5. I suppose, sir, that if one believe that we should abandon the Federal Reserve, re-adopt the gold standard and resort to a strictly “pay as you go” system of government, that you are correct.

    That posture admits to no serious discussion.

    I respectfully disagree.

  6. Hi!

    Where does the State of Maine acquire “credit” according
    to constitutional law?

    Where is the delegation of authority for the State of Maine
    to issue bonds according to constitutional law?

    Bonds are debt instruments.

    In the Constitution of the United States, States can ONLY use
    silver and gold to pay its debts – see Article I, Section 10, Clause

    Thank you!

  7. Actually, the handoff between the Republicrats and the Demlicans, and all the fluff issues such as Terror Scares, Gay Marriage, and Bailout Bonanzas are to provide a fast-moving smokescreen to distract everyone from the utter evisceration of all such social programs and systemic reforms. My assessment is that the terms and conditions of the (repeated violations of) social contracts   are going to get nothing but worse. 

    And for anyone considering investing in bonds: please take the time to project interest earnings vs. inflation. I guarantee, as your dollar tanks, you will have handed these same fraud-riddled sociopaths comprising these political parties an interest-free loan at your expense. For the economically disinclined, suppose your dollar invested today is worth seventy cents. At the end of the bond maturity period, inflation will reduce its purchasing power to the point where you LOST money by throwing it at a fail-forward investment  when you could have actually put it to use for you, rather than for the benefit of a system with an historical track record of  perpetual mismanagement thereof. Would you trade your tangible assets today for a broken promise of tomorrow? Buy the bonds. Put your retirement savings into them! Drink the koolaid. 

    Really telling is a recent editorial in the Business section of the Bangor Daily Cat Box Liner about “What It Might Take for Warren Buffett to Buy YOUR Business…” First of all, “get it out of Maine, and incorporate in Delaware” might be a logical first step! This is simply pie-in-the sky claptrap! Let me elaborate: this state has NO economic future. ANY investor can see this. NO amount of Emperor’s New Clothes can comp for the scuttling of our manufacturing industry. Nothing will bring the workers back. As more reduction of social services happens, people will stop buying things and vacationing. Result: Snowball of business closures, no job market, the state has been/is continuing to/will likely continue to bleed revenue, investors, and prosperity. What’s next? A prison labor gulag? Oh wait, it’s happening NOW!

    To Lise:
    The state acquires “credit” the same way any other PRIVATE CORPORATE ENTITY does. The fact that this state has continued to mismanage funds and marginalize care and opportunities for  so many of its residents speaks for itself. There’s nothing Constitutional about this (or really un-constitutional, per se, unfortunately). What is happening is the symptom of people allowing private interests to manage public funding systems. The parable of the cat and the mouse in partnership over a pot of fat applies here: Topoff, Half-gone, and it’s…All Gone! And the mouse followed as dessert. Poliquin is polishing a turd with hot air. Le Page’s “leadership team” follows the same policy of sweeping theft under the table with austerity measures as any other pro-fascist regime.

    I suspect that Mr. LePage thinks that by authoring a self-congratulatory bit of shill on State time, he can show the saps who buy into this nonsense how great he is while spending their money doing so.

    “recent reform to its public pension plan for teachers and state employees that reduced future annual payments from the state’s General Fund.”

    Read that: “You thought your employment future was secure. It’s gone. You’re all on your own, working for a vanishing dollar with no future! This is how you peons are rewarded for supporting our permanent vacation. We didn’t match your funds, we  stuck you with the bill for our  un-matched mandate! Ha-ha!”

    jtc:  I think you and Mr. Johnson are arguing different faces of the same elephant. I leave it to the two of you gentlemen to settle which end you are describing! He’s right: you remove a revenue source and where is the shortfall gonna be made up? One guess: What you THOUGHT you were paying taxes for: social services, social security, stuff to keep the people happy instead of paying back the usury incurred by the Fed. You’re right, although your observations are more consequential than issue-specific. You’re perhaps mistaken about one thing, though you nail the gist of the issue: things will change. For the worse…

    I cannot for the life of me see why ANYONE would view this state as an investment. It’s an albatross, just like this administration and the one before. Any bond-rater or investment broker worth his two cents can actually UNDERSTAND math, unlike anyone robbing Peter to pay Paul.

    How do we eliminate debt here in America? Default on the public, reward the vultures. See, no debt. You people who worked and paid in, or thought your employment contract should be (gasp) honored,  get…NOTHING!

    SHADDAP  and buy the bonds! The rating hasn’t changed. It still sucks! It’s a CDO. But you can feel good about that money going into the Collection Plate, because… God loves you!

    But we all have to sacrifice, say the people who get full benefits, healthcare, and salaries paid for by the taxpayers… as they vote themselves in less workweek, and better healthcare than ANYONE can reasonably afford these days!

    How does screwing people out of their benefits and pension plans equate to investing in our future? How much spin has to be put on it before the whole apparatus loses its balance and shakes itself apart? We are about to find out…

    Brought to you by Warren Hugh Bayloutz under an assumed account…


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