Debt, health costs flagged as challenges by Moody’s

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Massachusetts state government’s debt ratios are among the nation’s highest and its large unfunded public pension system liabilities represent another challenge, according to credit rating analysts who earlier this week affirmed the state’s high bond rating.

Moody’s Investors Service also flagged large health care and other social services costs and transportation system spending pressures as challenges, along with the impact of “federal downsizing” on the state’s health care and research sectors.

Analysts said the state’s bond rating could go up if there’s continued rebuilding of state reserves and stronger constraints on the use of reserves, an “established trend of structural budget balance,” and reduced debt ratios.

Moody’s assigned an Aa1 rating to the state’s $159 million general obligation refunding bonds that will be used to refund outstanding general obligation bonds. Moody’s said the rating reflected the state’s “strong financial management practices and its demonstrated willingness to balance its budget when necessary through spending cuts, revenue increases and use of reserves.”

The state’s “high wealth and high levels of education attainment” backstop its economic base and provide stability in employment, Moody’s said, giving Massachusetts a stable outlook “reflecting its good reserve levels and efforts to regain structural budget balance.”

– M. Norton/SHNS