Maryland's 2019 First Series Tax-Exempt General Obligation Bonds Rated 'AAA'; Other Ratings Affirmed


NEW YORK (S&P Global Ratings) March 15, 2019--S&P Global Ratings assigned its 
'AAA' long-term rating to Maryland's state and local facilities loan of 2019, 
first series tax-exempt general obligation (GO) bonds. 

At the same time, S&P Global Ratings affirmed its 'AAA' rating on the state's 
GO debt outstanding and its 'AA+' rating on state obligations outstanding 
supported by lease payments under a master lease, subject to appropriation. 
S&P Global Ratings also affirmed its 'AA+/A-1' rating on the Maryland Stadium 
Authority's series 2007 sports facilities lease revenue refunding bonds 
secured by lease rental payments subject to annual appropriation by the state. 
S&P Global Ratings also affirmed its 'AA+' rating on Maryland Department of 
Transportation's (MDOT) county transportation revenue bonds supported by 
capital grants appropriated from MDOT's Transportation Trust Fund (see report 
published May 18, 2018, on RatingsDirect). The outlook on all long-term 
ratings is stable. 

Our 'AAA' long-term rating on Maryland's GO bonds reflects our view of the 
state's: 
  • Broad and diverse economy, which continues to post slow growth;
  • Strong wealth and income levels relative to those of the nation;
  • Long history of proactive financial and budget management, including implementation of frequent and timely budget adjustments to align revenues and expenditures and long-term financial planning that should continue to help the state address future budget challenges; and
  • Well-developed debt management practices with rapid amortization of principal, although some debt ratios and long-term pension and other postemployment benefits (OPEB) liabilities remain moderately high, in our opinion.
"The stable outlook reflects Maryland's continued focus on structural budget 
alignment and maintenance of minimum state reserves at levels we consider 
good, despite continued slow economic growth," said S&P Global Ratings credit 
analyst Sussan Corson. 

The state's practice of making proactive midyear adjustments to align the 
budget in case of slower-than-anticipated revenue growth will remain an 
important credit factor over the two-year outlook horizon, given Maryland's 
above-average economic dependence on federal government employment and 
spending. Cost pressures related to health and human services spending as well 
as education funding could exacerbate future budget gaps. Should the state 
fail to make proactive budget adjustments or rely significantly on reserves 
and other one-time sources, we could lower the rating. Further slowing of 
economic growth compared with that of the nation, withdrawal of federal fiscal 
aid, or changes to tax policy that strain the state's economy and budget, 
coupled with ongoing growth in debt and liability burdens and failure to 
demonstrate a consistent commitment to fully funding pensions and OPEB 
obligations, could also pressure the rating.
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