Maryland's upcoming special session will put the budget reconciliation bill back on the table, but as long as the so-called doomsday budget remains an option, one of Montgomery County's bond rating agencies has said its "credit negative" assessment remains valid.
The yet-to-be-approved budget reconciliation bill that the General Assembly will take up again May 14 threatens to push significant costs onto Montgomery, as much as $27 million in fiscal 2013 for teacher pensions.
The doomsday budget would cut more than $500 million in state spending, resulting in $41.4 million cut from Montgomery County, according to credit rating agency Moody's.
Because the county must accommodate the state budget decision by adjusting its spending plan, if implemented as it stands, the doomsday budget could have negative impact on the credit of the county in the view of Moody's, company spokesman David Jacobson said in April.
"I think it is something we are saying they should be mindful of," he said previously. "These costs could come down and the county should start planning for whatever actions it needs to take to accommodate the changes."
Because the General Assembly will be in special session and a new budget under development, Moody’s cannot comment on the budget reconciliation bill at this point, Jacobson wrote in an email Tuesday.
“We may once it is finalized,” he wrote.
Moody's has the power to downgrade the county's bond rating, making it more expensive for the county to borrow money for capital projects.
Based on the most recent estimates, a downgraded bond rating could cost the county more than $50 million in one six-year capital budget and significantly more in the long term, County Finance Director Joseph Beach said previously.
Montgomery boasts a AAA rating with Moody's, but had been assigned a negative outlook for its indirect link to the weakened credit profile of the U.S. federal government.
Judged to be of low credit risk, a AAA rating indicates the agency thinks Montgomery is the least likely to default, Jacobson said.
However, Moody's constantly analyzes external and internal variables, acting as an independent barometer of a variable's impact on credit worthiness, he said.
"We will see how the county adapts to it," he said previously of the state budget. "If we feel a change is warranted in the county's outlook or rating, we will make that decision as we feel it is necessary."
Standards and Poor’s and Fitch Ratings, the county's other bond rating agencies, did not return requests for comment on the issue.