Maryland Loses AAA Bond Rating for first time in over 50 years, ending a historic run of fiscal stability that stretched back to 1973.
Statement by the Maryland Freedom Caucus – “Governor Wes Moore’s attempt to shift blame for Maryland’s credit downgrade is as misleading as it is predictable. Democrats have controlled the Maryland General Assembly for over a century and have dominated state policymaking through consistent legislative majorities.
The Democrat-dominated General Assembly drives the budget process — and it shows. For years, they’ve passed bloated budgets, diverted billions into pork-barrel projects, and handed out politically driven bond and line-item grants with little accountability. If you’re a fiscal conservative, you respect the procurement process — because competitive, merit-based spending is how government is supposed to work. Annapolis Democrats replaced that with favoritism and waste.
This downgrade didn’t come from Washington — it came from Annapolis. While Moody’s warned Maryland a year ago with a negative outlook, Democrats responded by doubling down on unsustainable spending and expanding debt obligations.
This year’s budget alone included $1.6 billion in tax increases, further punishing working families while doing nothing to correct course. Now Maryland families will bear the cost. Governor Moore may be trying to spin a narrative, but no amount of rhetoric can change the fact that one-party rule and reckless fiscal policies led to this outcome. The Maryland Freedom Caucus will continue to fight for transparency, restraint, and real fiscal accountability — before the damage gets worse.”
Former Governor Larry Hogan released the following statement 5/14/2025: “For eight years, during the terms of presidents from both parties and during a global pandemic, we maintained the AAA credit rating Maryland had enjoyed since 1973.
In less than two years, Annapolis politicians’ reckless policies have ruined over half a century of steady stewardship. It breaks my heart to see so much hard work and fiscal discipline thrown out in favor of tax hikes and unlimited spending.
This didn’t happen in a vacuum. The state was warned last year that this could happen and made no changes. In fact, they doubled down on taxes and spending.
This credit downgrade should be a wake up call to Marylanders that the financial mismanagement in Annapolis isn’t just rhetoric or scare tactics — it’s real, it’s here, and it’s hurting everyone in the state.
I urge, in the strongest possible terms, our elected leaders to change course and restore fiscal sanity before the situation gets worse for Marylanders.”
Governor Wes Moore Press Release and Statement 5/14/2025: Lieutenant Governor Aruna Miller, Treasurer Dereck Davis, Comptroller Brooke Lierman, House Speaker Adrienne Jones, and Senate President Bill Ferguson released the following statement on Moody’s Credit Rating:
“To put it bluntly, this is a Trump downgrade. Over the last one hundred days, the federal administration’s decisions have wreaked havoc on the entire region, including Maryland. Washington, D.C. received a credit downgrade. Thousands of federal workers are losing their jobs. Actual and proposed cuts to everything from health care to education will continue to exact an incalculable toll on Maryland and states across the country.
“As our people deal with the repercussions, our proximity to the nation’s capital makes us particularly vulnerable to this administration’s reckless policies. We are proud of the work that Maryland residents who are federal workers provide to our nation, and we are disgusted that the Trump Administration continues to indiscriminately fire these dedicated public servants.
“Last week, we met with Moody’s to discuss our collective work protecting the full faith and credit of the State of Maryland. Together, we turned a deficit into a surplus, gave the middle class tax relief while still raising critical revenue through strategic tax reforms, and reduced spending by over $2 billion – the largest amount that’s been cut in a Maryland state budget in 16 years. Maryland’s creditworthiness has only been strengthened by our collective work on this budget.
“Over the last two years, Maryland has seen strong economic momentum. We’ve created nearly 100,000 jobs, seen some of the lowest unemployment rates in the nation, and experienced one of the fastest job growth rates. Yet, this was not enough to overcome a downgrade caused by the recent actions of the Trump Administration.
“As Moody’s acknowledged, state actions ‘closed a budget gap although the need for further corrective steps may arise directly from federal funding cuts or the economic consequences of federal layoffs and other policy shifts, to which Maryland has a very high degree of exposure.’
“Maryland still holds one of the highest possible credit ratings in the nation, and as we have for decades, we will always pay our debts. We have taken proactive steps to protect our people and fortify our state in the face of federal headwinds. And together, we will continue to answer crisis in Washington with courage in Maryland.”
MOODY’S PRESS RELEASE 5/14/2025: Moody’s Ratings (Moody’s) has downgraded the State of Maryland’s issuer and general obligation ratings to Aa1 from Aaa, and assigned a Aa1 rating to the state’s $900 million General Obligation Bonds, State and Local Facilities Loan of 2025, First Series A Tax-Exempt Bonds (Competitive) and $710 million First Series B Tax-Exempt Refunding Bonds (Competitive).
The downgrade was driven by economic and financial underperformance compared to Aaa-rated states, which is expected to continue given the state’s heightened vulnerability to shifting federal policies and employment, and its elevated fixed costs.
The downgrades affect outstanding debt with aggregate par value of about $15 billion. The outlook on the issuer and long-term ratings has been revised to stable from negative.
Rating actions are as follows:
Downgrades:
- Issuer rating, downgraded to Aa1 from Aaa
- General obligation (GO) bonds, downgraded to Aa1 from Aaa
- Annual appropriation obligation bonds for essential purposes, downgraded to Aa2 from Aa1
- Maryland Infrastructure Financing Intercept Program, downgraded to Aa2 from Aa1
- Annual appropriation obligation bonds for less essential purposes, downgraded to Aa3 from Aa2
- Built to Learn Revenue bonds, downgraded to Aa3 from Aa2
- Bay Restoration Fund Revenue bonds, downgraded to Aa3 from Aa2
- Baltimore City Public Schools Construction and Revitalization Program Revenue bonds, downgraded to A1 from Aa3
Affirmation:
- Maryland Stadium Authority variable-rate debt, affirmed at VMIG 1
RATINGS RATIONALE
Maryland’s Aa1 issuer rating reflects the state’s wealthy and diverse economy and proactive financial management practices including a well-established tax revenue forecasting process and strong capacity to impose midyear spending cuts. The state recently addressed a trend of overspending in various programs through a combination of tax increases and restraints on expenditures. These actions closed a budget gap although the need for further corrective steps may arise directly from federal funding cuts or the economic consequences of federal layoffs and other policy shifts, to which Maryland has a very high degree of exposure. The state’s financial reserves remain strong by its historical standards, although lower than those of Aaa-rated states.
The state’s Aa1 general obligation bond rating incorporates a pledge of the state’s full faith and credit. In addition, a statewide property tax is dedicated to GO debt repayment.
The Aa2 ratings on annual appropriation obligation bonds factor in the contingent nature of the state’s payment obligation, which requires annual legislative appropriation, as well as the more essential nature of the projects financed (such as transportation infrastructure).
The Aa2 pledge specific rating on the Maryland Infrastructure Financing Intercept Program incorporates the state’s commitment to the program and the essentiality of purposes supported by the program, which are public infrastructure projects. The position of the intercept program in the hierarchy of state debt and spending priorities is comparable to the state’s obligation on subject-to-appropriation debt. Funds subject to intercept include local governments’ shares of state-collected revenue (from income and highway use taxes).
The Aa3 ratings on bonds issued by the Maryland Stadium Authority for sports arena and convention center projects incorporate the contingent nature of these obligations, which are payable subject to annual legislative appropriation, in addition to the financed facilities’ less essential nature.
The Built to Learn Revenue bonds’ Aa3 rating is supported by strong coverage (9.7 times MADS) from a larger pool of casino table game and video lottery terminal receipts, provided subject to annual appropriation. Gaming revenue is constitutionally restricted to education purposes, including Built to Learn program debt service. The economically sensitive nature of revenue from discretionary spending entails elevated social risk, vulnerabilities that came to the fore during the pandemic. Transfers are subject to annual appropriation.
The Bay Restoration Fund Revenue bonds’ Aa3 rating accounts for payment of debt service from pledged water treatment system user fees, which have stagnated during the past decade because of weak economic and demographic trends and technology that allows reduced water use. The challenges collecting fees from systems of varying sizes were highlighted during the pandemic. Current MADS coverage of 3.8 times is solid, but the program includes a comparatively lax leverage constraint, requiring only 1.1 times MADS.
The A1 rating on the Baltimore City Public Schools Construction and Revitalization Program Revenue Bonds incorporates the relationship of the state, and City of Baltimore (Aa2 stable) and the Baltimore City Board of School Commissioners, to the program, which relies on revenue from various sources. The program’s three-notch distinction from the state issuer rating is consistent with the need for annual legislative appropriation for payment with a substantial share of revenue, as well as the narrow and potentially volatile nature of revenue included: from the state, portions of state lottery proceeds and aid to the Baltimore City Board of School Commissioners; from the city, other school aid in addition to city revenue from bottle taxes, table game proceeds and casino rentals. The city’s obligation to the program is supported by a state pledge to intercept undistributed city income tax collections if needed.
The VMIG 1 rating on one of the Maryland Stadium Authority issues, the Sports Facilities Lease Revenue Refunding Bonds Football Stadium Issue, Series 2007, is based on a standby letter of credit and reimbursement agreement issued by Sumitomo Mitsui Banking Corporation (A1 long-term counterparty risk rating, P-1 short-term counterparty risk rating), expiring March 1, 2026, the bonds’ maturity date. The rating incorporates low probability of premature SBPA termination without payment of the debt. Events that would trigger termination without payment are linked to the state’s credit quality, such as rating downgrades below investment grade (below Baa3).
RATING OUTLOOK
A stable outlook on the issuer and long-term ratings is consistent with Maryland’s capacity to adjust to conditions including federal policy changes that may undermine tax revenue or increase need for state funding.
The outlook also applies to the Baltimore City Schools Construction and Revitalization Program, MD, the Baltimore Board of School Commissioners, MD, and the Maryland Infrastructure Financing Intercept Program.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Economic outperformance demonstrated by real GDP growth, exceeding the national pace by at least 30 basis points, and demonstrating reduced vulnerability to federal actions
- Sustainable measures that eliminate out-year budget gaps linked to education funding or other programs
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Inability to maintain fiscal balance despite recent revenue increases that leads to a 20% reduction in available fund balance
- Recurrence of unanticipated program expense increases or reliance on one-time sources to achieve balance that undermines governance profile
- Failure to adhere to policies to address large, unfunded pension liabilities
PROFILE
Maryland includes 3,190 miles of the US East Coast, according to the National Oceanic and Atmospheric Administration. Its population of about 6.26 million ranks 18th among states and their $542.8 billion 2024 GDP (current-dollar), according to the US Bureau of Economic Analysis, was the 18th-largest.
METHODOLOGY
The principal methodology used in the issuer, general obligation, annual appropriation obligation, Built to Learn Revenue bonds, Bay Restoration Fund Revenue bonds, and Baltimore City Public Schools Construction and Revitalization Program Revenue bonds ratings was US States and Territories published in July 2024 and available at https://ratings.moodys.com/rmc-documents/425428. An additional methodology used in the Baltimore City Public Schools Construction and Revitalization Program Revenue bonds ratings was US State Aid Intercept Programs and Financings published in February 2024 and available at https://ratings.moodys.com/rmc-documents/415020.
The principal methodology used in the short-term rating was US Municipal Short-term Debt published in October 2024 and available at https://ratings.moodys.com/rmc-documents/430699.
The principal methodology used in the other notched general government obligation non GO rating was US State Aid Intercept Programs and Financings published in February 2024 and available at https://ratings.moodys.com/rmc-documents/415020.
Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For any affected securities or rated entities receiving direct credit support/credit substitution from another entity or entities subject to a credit rating action (the supporting entity), and whose ratings may change as a result of a credit rating action as to the supporting entity, the associated regulatory disclosures will relate to the supporting entity. Exceptions to this approach may be applicable in certain jurisdictions.
For ratings issued on a program, series, category/class of debt or security, certain regulatory disclosures applicable to each rating of a subsequently issued bond or note of the same series, category/class of debt, or security, or pursuant to a program for which the ratings are derived exclusively from existing ratings, in accordance with Moody’s rating practices, can be found in the most recent Credit Rating Announcement related to the same class of Credit Rating.
For provisional ratings, the Credit Rating Announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating.
Moody’s does not always publish a separate Credit Rating Announcement for each Credit Rating assigned in the Anticipated Ratings Process or Subsequent Ratings Process.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
