State's soundness wows bond raters


To the thousands of Marylanders still out of work more than two years after the national recession officially ended, recovery is proving almost as excruciating as recession.

Even as the state begins to turn around, virtually every week brings a new round of layoffs and fresh proof that employment, business activity and tax collections are turning upward later and more gradually in Maryland than in most of America.

But to one small and coldly objective band of professionals, Maryland's economy, warts and all, doesn't look all that ugly.

To the women and men who track states for bond-rating agencies, and to their colleagues who advise investors on which bonds to buy, the bottom line is whether a state will be able to pay off the bonds it already has out and pay back the bonds it is now issuing.

A lot of what these analysts think has to do with how tough the governor and legislature are about balancing a budget, how officials present their case (and themselves), and how good a record the state has of paying off past debts.

Bond rating agencies and bond analysts have always given Maryland high marks on all of these points, and that is one key to its good credit rating.

But anyone who makes a living thinking about whether a state is a good credit risk soon finds himself or herself looking into the state's near-term and long-term economy.

"In terms of contribution to gross national product as well as in terms of employment base, Maryland exhibits an enviable economy, being both diverse and balanced," Jill Mason, a bond analyst for Nuveen Research, wrote in a recent report on Maryland.

Enviable? Hasn't she heard how many construction workers can't find work around here?

She has. And about the relentless losses in defense and manufacturing jobs.

But when bond analysts look at Maryland, they also see:

* Unemployment at 6.2 percent, still below the 6.4 percent national average despite continuing job losses.

* Per-capita income that ranks fifth in the country, nearly $3,000 a year higher than the national average, at the end of an economic slump that has lasted nearly three years here compared with lessthan a year in much of the nation.

* Five million people whose effective purchasing power, adjusted for local cost of living, is more than double the national median.

* A state that depends on the ever-shrinking manufacturing sector for only 11 percent of its economy, compared with 19 percent in the rest of the country.

* An economy that will always draw strength from near-by Washington because the federal government can only cut back so far.

In those senses, Maryland's continued triple-A rating, by all three key services that rank government bonds, reflects much more than just the highly polished and much-publicized road show state officials put on for New York analysts every year.

Take away the underlying strength of the economy itself, and no combination of slides, videos and talk, nor any feats of financial management or legerdemain, would sustain a top credit rating.

That won't make it feel any better to be out of work.

But it does say that one corps of cold-blooded professionals believes that on balance, even after three grim years, Maryland is in better economic shape than most states and likely to stay that way.

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