NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA' to approximately $102,700,000 State of Maine general obligation (GO) bonds expected by negotiation the week of May 19. The bonds are due May 15, 2009-2018. Fitch also affirms the rating on $369.9 million outstanding state GO bonds at 'AA'. The Rating Outlook is Stable.Maine's 'AA' GO rating reflects the credit strengths from the state's low debt burden, very rapid debt amortization as well as adherence to its financial reforms in the areas of general fund appropriation limits, debt controls and funding of reserves. State finances remain pressured by tax relief, and increased costs for education and health care in the midst of slower economic growth along with the risk of citizens' initiatives. The Stable rating outlook reflects the state's continued ability to manage structural imbalances while maintaining reserves and funding of pension liabilities.
Maine's debt ratios are low and all GO debt is due within ten years. Debt is strongly secured by constitutional provisions requiring GO principal and interest to be a first charge on the general fund. Net tax-supported debt totals $856.1 million, equal to 1.9% of 2007 personal income. The state's pension funding program has increased funding levels, rising to 79.7% in fiscal 2007. The state has begun to fund other post-employment benefits. The initiative process remains active in Maine, especially for tax and expenditure limits. A taxpayer bill of rights (TABOR) was defeated on the November 2006 ballot, enabling the state's previously enacted legislation to prevail. This legislation set expenditure limits while increasing education funding and property tax relief. The state's adherence to its fiscal controls have enabled reduction of structural gaps, phasing in the a larger, 55% state share of education funding to provide property tax relief, absorbing revenue shortfalls for the current biennium while enlarging reserves to 5% of revenues. Revenue forecasts were revised in March 2008, with reductions reflecting tax relief and slower economic growth requiring budgetary adjustments to resolve a 3% budget gap for the biennium ending June 30, 2009. In separate consolidations the state has provided efficiencies in school administration as well as correctional services. Reserves are projected to rise to $159.5 million by June 30, 2009 and include $118.9 million estimated for the budget stabilization fund.
Maine's economy has expanded from its traditional industries of manufacturing, natural resources and tourism with gains in the trade and the education and health services sectors offsetting losses in manufacturing. Employment growth preceding the most prior downturn was strong, outpacing national gains. For the past three years, employment gains remained well below the nation despite business investment that is geographically and economically diverse. Employment in 2007 rose a modest 0.4% compared to 1.1% for the U.S., and March 2008 employment was flat from a year ago. The state's personal income gains also remain below the U.S. rising 5.3% in 2007 equal to 85% of the U.S. growth rate. The state is ranked 35th among the states by measure of personal income per capita, equal to 87% of the U.S. level. Maine's median age is the oldest among the states, 41.1 years, contributing to uncertainty about future workforce growth.
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