S&P Global Ratings on Friday raised Massachusetts’s general obligation long-term credit rating to AA-plus from AA, and upgraded bonds backed by annual appropriations from the state.
“The upgrade reflects our view that the commonwealth’s commitment to strengthen its budget management practices supported by the state’s improved reserves and a strong economy will be sustained through near-term recessionary pressures,” said S&P credit analyst Ladunni Okolo.
The rating agency assigned an AA-plus long-term rating to Massachusetts’ expected mid-May sale of $720 million GO bonds, consolidated loan of 2023, series A and $275 million GO refunding bonds, 2023 series A. The outlook is stable.
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It also raised the long-term rating to AA-plus from AA on the Massachusetts Bay Transportation Authority‘s sales tax bonds, and the Boston Housing Authority‘s series 2003 housing project bonds that are backed by annually appropriations to A-plus from A on.
S&P said strong revenue growth and federal aid helped Massachusetts rebound strongly from the pandemic, “ending its last two fiscal years in an extremely strong financial position with the highest level of reserves in its history. “
Also on Friday, Moody’s Investor Service assigned an Aa1 rating with a stable outlook to the bonds expected to be priced next month, in line with Massachusetts’ issuer rating, reflecting expectations “that the commonwealth will continue its trend of strong financial management, taking proactive measures to navigate challenges that could emerge if the economy slows over the near term.”
Fitch Ratings assigned the bonds a AA-plus.
The state’s budget stabilization fund has grown to a record $6.9 billion and is expected to reach almost $9 billion by the end of fiscal ’24, according to Massachusetts Gov. Maura Healey’s office.
However, as the economic environment changes, S&P warned, the state’s commitment to boosting reserves and better fiscal management may come under pressure over the next two years.
“Nevertheless, the commonwealth still faces headwinds as national recessionary pressures persist, with long-term liabilities remaining among the highest in the nation and persistent underfunding of its pensions, which could lead to budgetary pressures as revenue growth softens,” it said.