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G-C G.C& 8C)2'.m 3# fl)|3S*. UMASS/AMHERST ' 1! 1 j 312066 0308 0517 5 G° l - S: m C J 6 m$ De POSitory Copy Massachusetts House of Representatives Credit RatJ/aadieek Perce Report Recommendations Credit Rating Task Force Match Revenues Create against Expenses Structural Balance Show a realistic, Tobacco Bonds value evidence-backed plan dubious long term is Avoid Gimmicks Save now for next Avoid One-shot Deals rainy day Deficit Financing: Evaluate details and Risky and Expensive exit strategy for any new borrowing : "courage, integrity, judgment and dedication- the qualities... sent to this chamber (to prevail against) The Credit Rating Task Force ...the stormy years that lie ahead." On behalf of Representative Parente, Representative Wagner, and all the honorable |OHNr KENNCm STOMFROMTHISROS1 members of our respective committees we thank TOTHEMASSACHUSETTSCENTRALCOURTUNIANUARYVMi you for your attention and support, Rep. James H. Fagan, chairman HousePostAudit andOversightCommittee .. wht- A, SiGali Rep. JosephWWagner, chairman CommitteeonTransportation ?jv CKtburr.-.v »Vj., kl'SNECn >S:Sr^£v;rtNTCrTHCl*MTIO^TfTfN Rep. ManeJ. Parente, chairman HouseCommitteeonLongTerm Debt CRTF Seminar participants Members of the CRTF Treasurer of the Commonwealth Executive Office of Administration and House Committee on Post Audit and Finance Oversight Comptroller of the Commonwealth Fitch Ratings House Committee on Transportation Standard and Poor's Corp. MassPort, MBTA, MassPike; Federal Reserve Bank of Boston; House Committee on Long Term Several Investment banks Debt Massachusetts Taxpayers Foundation Misery versus Happiness Massachusetts House of Representatives Don't spend more than you earn Doing Its Job ^Bm '.''>"£'!':" >-"•-'".';• "CoMpypeort-fhieerlda.d"viscaei,d Mr. "No one is watching their credit rating Micawber, you know. better than'the Massachusetts House of Annual income twenty pounds, annual Representatives, certainly (the leader) in expenditure nineteen, nineteen six, result the Northeast." - nationalcredit rating agency happiness . "Annual income twenty pounds, annual expenditure twenty pounds, ought and six, result misery ...in short, you are for everfloored. As I am!" Good Management Put on my Important Ratings Assessments it bill Some states take actions and hope A duck walks into a bar and orders a that things get better; this is not a drink. good strategy. The bartender says Rating agencies assess a state's fine, but how are you management by credible evidence: going to pay for this drink? What is the strategy/plan? The duck says: Will it work? Put it on my bill! What and where is the proof? Massachusetts: Wealthy state but deeply indebted First "snap shot" for credit rating agencies is gross personal income and its relation to overall state debt Massachusetts income to debt ratio 9 percent is Rating agencies danger zone 10 percent income/debt is ratio % Fitch Ratings Formula for 9 of New England States Fitch Ratings assess a state's debt Connecticut AA position by dividing the total state Maine AA+ debt (Mass. = $22.7 billion) by the gross personal income (Mass. = Massachusetts AA- $248.2 billion) to achieve a ratio. New Hampshire AA+ Mass. debt to income ratio Rhode Island AA 9.1 percent I is Vermont AA+ Credit Rating Agencies: S&P Ratings The Umpire Strikes Back for New England States Downgrades follow Connecticut AA bad judgments Maine AA+ Credit Rating Massachusetts AA- Agencies sort out the structurally New Hampshire AA+ balanced plans from schemes, Rhode Island AA- gimmicks, and one-shot deals. Vermont AA+ The Rating Agencies Moody's New England View of Massachusetts "G-O" Debt state debt ratings Fitch Conn. = Aa2 negative outlook and Ratings AA- Negative negative watch list outlook Maine = Aa2 stable outlook Standard and Mass. = Aa2 negative outlook Poor's (S&P) AA- Stable . N.H. = Aa2 stable outlook Outlook m R.I. = Aa3 stable outlook Moody's Investor Aa2 Negative . VT = Aal stable Service outlook KjOngap«fMoody*!IniUcrSr*ce