Moody’s Maintains Maine’s Aa3 Bond Rating, Cites Improving Fiscal Operations

May 11, 2007

For Immediate Release. Contact: David Lemoine; 624-7477

(AUGUSTA) – Treasurer Dave Lemoine today welcomed the announcement from Moody’s Investors Service that it will maintain Maine’s Aa3 general obligation bond rating. “This is the good news we expected,” said Treasurer Lemoine, noting that “the rating contained several timely credit observations.” Two key points are excerpted below:

  1. “Next month and again in November 2007, the state will seek voter approval of a significant increase in bond authorizations in part to address infrastructure maintenance needs, particularly for transportation. Even at higher levels, Maine's debt position should remain manageable.”

  2. “Maine's financial operations have improved in recent years reflecting management's efforts to control spending and rebuild balances depleted during the recession. At the same time, the state has stepped up its spending on K-12 education as mandated by a citizens' initiative approved in 2004.”

“The Aa3 rating and stable outlook indicates that Maine is fiscally sound. We expect to once again have a very strong bond sale in both the retail and institutional markets,” stated State Treasurer David Lemoine. The ratings were acquired in anticipation of selling nearly $60 million of general obligation bonds starting late next week. The retail sale period will take place on May 18 and 21st. The Moody’s rating report highlights several credit strengths including: the management of spending levels while absorbing substantial K-12 education costs mandated by citizens' initiative; the commitment to improving available reserve levels to enhance financial flexibility; and debt ratios on both per capita and personal income basis remain below 50-state medians, providing flexibility to shift from pay-go to debt capital financing.

Credit challenges cited in the report include: combined available reserves remain negative due to the negative position of the state's General Fund unreserved, undesignated balance, despite efforts to rebuild Maine's Budget Stabilization Fund (BSF); Medicaid costs pose continuing challenges to Maine's budget; liquidity remains narrow due to still modest combined reserve levels; citizen's initiative activity continues to add an element of fiscal uncertainty; and Maine's economic growth lags the national pace and slower job growth could hinder Maine's revenue performance.

For a copy of the Moody’s report, please go to www.moodys.com.