Bond-rating agency gives Baker budget thumbs up

Standard & Poor’s Ratings Services sees “mildly positive credit trends” in Governor Charlie Baker’s proposed state budget.
Aram Boghosian for The Boston Globe/File 2016
Standard & Poor’s Ratings Services sees “mildly positive credit trends” in Governor Charlie Baker’s proposed state budget.

A top bond-rating agency gave a modest thumbs up to Governor Charlie Baker’s budget proposal Thursday, a boost for the Republican that could help him convince the state Legislature to pass a spending plan in line with the broad strokes of his proposal.

Standard & Poor’s Ratings Services said Thursday that Baker’s proposal suggests “mildly positive credit trends” because of its effort to reduce the state’s reliance on one-time sources of money, and its modest push to restock the state’s drawn-down rainy day fund.

S&P cautioned that the governor’s proposal is just that — the Legislature has the final say over the state budget — and its report does not change the state’s bond rating.


Still, the three-page document is somewhat significant for Baker, who won a 2014 gubernatorial campaign pledging efficient government and fiscal discipline, and is expected to run for reelection in 2018. That’s because the report represents a nonpartisan outside validator offering praise, if restrained, for his spending plan.

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Baker last month proposed a $39.6 billion state budget that worked to rein in ballooning health care costs and leave much of state government with essentially the same amount of money it is getting this fiscal year, which runs through June. Baker’s plan would not raise taxes or fees.

Baker administration officials have repeatedly trumpeted what they say is their fiscal restraint and crow that their budget proposal relies on much less one-time money than has been used in previous years.

A “one-timer,” as it is known in Beacon Hill budget jargon, is money that, unlike tax revenue, doesn’t come back year after year — such as the cash generated by selling a state building or draining the state’s rainy day fund.

Watchdogs generally see relying on one-timers as a bad fiscal practice.


Use of one-timers dropped from $1.2 billion in the fiscal year that ended in June 2015, to an estimated $600 million in the current fiscal year, to $253 million in the governor’s proposed budget for the fiscal year that begins in July.

“We view the potential reduction in the use of one-time budget items as positive from a credit perspective,” the rating agency wrote.

S&P also was upbeat about Baker’s plan to deposit more than $200 million in the state’s rainy day fund, meant for fiscal emergencies but tapped repeatedly by Beacon Hill leaders in previous years even as the economy was humming along.

The New York-based bond-rating agency said it believes it “is a positive credit development after three years of essentially flat balances in the stabilization fund,” using another term for the rainy day account.

Still, the agency noted Baker’s budget proposes diverting $150 million in capital gains revenue meant for the state’s rainy day fund, part of the $253 million in one-time money.


Finally, S&P noted that Baker is not planning to raise taxes and Massachusetts’ “tax structure now compares favorably to neighboring states.”

S&P, offering caution about Massachusetts’ dwindling rainy day fund, sent up a warning flare in late November, saying the state’s bond rating — currently at the second-highest level — may be lowered over the next two years. That could make it more expensive for the state to borrow money, with millions more in debt payments every year.

Baker’s budget chief was, not surprisingly, pleased with the new report.

“The administration is glad S&P recognizes the governor’s budget proposal continues our significant progress toward stronger fiscal stability by reducing the structural deficit, rebuilding the rainy day fund, without raising taxes,” Kristen Lepore, the secretary of the Executive Office for Administration and Finance, said in a statement.

S&P noted however that the state faces fiscal headwinds in the years ahead: high debt and pension liabilities, as well as spending on health care for poor and disabled people that continually increases at a rate far faster than inflation and eats up more than one-third of the budget.

The analysis is premised on continued economic growth. Left unsaid is that if the economy goes south, Massachusetts would likely be mired in tough fiscal times quite quickly.

Joshua Miller can be reached at Follow him on Twitter @jm_bos and subscribe to his weekday e-mail update on politics at