The Bond Buyer - - Front Page - By Paul Bur­ton

bil­lion in its rainy-day fund for the first time in 11 years is a ma­jor plus for the com­mon­wealth, ac­cord­ing to state Trea­surer Deb­o­rah Gold­berg.

Mas­sachusetts ex­ceed­ing $2 bil­lion in its rainy-day fund for the first time in 11 years is a ma­jor plus for the com­mon­wealth, ac­cord­ing to state Trea­surer Deb­o­rah Gold­berg.

“Given the un­cer­tain­ties in our world-wide economies, this is ex­cel­lent progress,” Gold­berg said at the eighth an­nual Mas­sachusetts In­vestor Con­fer­ence at the Bos­ton Con­ven­tion and Ex­hi­bi­tion Cen­ter.

Mas­sachusetts in late June de­posited $322 mil­lion into its sta­bi­liza­tion ac­count. State law re­quires di­ver­sion of ex­cess cap­i­tal gains into the fund.

One year ear­lier, S&P Global Rat­ings down­graded Mas­sachusetts to its third-high­est tier, to AA from AA-plus. S&P, in the first down­grade of the com­mon­wealth’s GOs in 23 years, cited the fail­ure by state of­fi­cials to not fol­low through on rainy-day re­plen­ish­ment de­spite eco­nomic growth above the na­tional av­er­age and through pro­longed ex­pan­sion.

In ad­di­tion, Mas­sachusetts ex­pects a wind­fall from new mar­i­juana tax revenue. State revenue Com­mis­sioner Christo­pher Hard­ing said the mar­i­juana in­dus­try could cor­ral $93 mil­lion to $172 mil­lion in for fis­cal 2020.

Fitch Rat­ings and Moody’s In­vestors Ser­vice rate Mas­sachusetts GOs AA-plus and Aa1, re­spec­tively.

Mas­sachusetts’ healthy econ­omy for now out­weighs its high legacy costs, said Alan Schankel, a man­ag­ing di­rec­tor with Jan­ney Cap­i­tal Mar­kets. Ac­cord­ing to Moody’s, they sur­pass the na­tional av­er­age.

“They never talk about their debt and li­a­bil­ity lev­els, which are pretty high,” said Schankel. “It’s a con­cern, al­though their econ­omy is do­ing bet­ter than most states. They have a lot of things go­ing with tech and ‘eds and meds’. Whether that con­tin­ues re­mains to be seen.”

Fed­eral tax cuts re­sulted in many one-time tax pay­ments and ac­count for most of the state’s $1 bil­lion-plus sur­plus for fis­cal 2018, said Michael Good­man, ex­ec­u­tive di­rec­tor of the Pub­lic Pol­icy Cen­ter at the Univer­sity of Mas­sachusetts, Dart­mouth.

Schankel warned that many states could de­velop a false sense of se­cu­rity over the one-time revenue.

“You need to worry about that,” he said. “You don’t want to count next year’s chick­ens.”

Gold­berg, a Demo­crat, and Gov. Char­lie Baker, a Repub­li­can, said they will con­tinue to work to­gether on eco­nomic mat­ters. Vot­ers re-elected both to four-year terms in Novem­ber.

“We have a very col­lab­o­ra­tive en­vi­ron­ment here in the com­mon­wealth,” Baker told in­vestors on a con­fer­ence call. Adding to the rainy-day fund, said Baker, “speaks to the high level of bi­par­ti­san­ship, cre­ativ­ity and co­op­er­a­tion be­tween the branches of gov­ern­ment.”

“Mas­sachusetts is es­sen­tially an east coast Demo­cratic blue state,” said Schankel. “If the Repub­li­can gover­nor wants to get any­thing done, he has to work with his leg­is­la­ture.”

Gold­berg also cited the growth of the Pen­sion Re­serves In­vest­ment Man­age­ment fund to $72 bil­lion, call­ing it “one of the top per­form­ing in its class.” The Amer­i­can In­vest­ment Coun­cil re­cently ranked PRIM first in pri­vate eq­uity re­turns among 163 U.S. pub­lic pen­sion funds based on 10-year per­for­mance.

She also ref­er­enced the com­mon­wealth’s proxy vot­ing guide­lines re­quir­ing that 30% of the cor­po­rate boards have women and di­verse di­rec­tors, that no di­rec­tor can serve on more than four cor­po­rate boards at a time, and that com­pa­nies con­tinue to pro­vide pro­tec­tions to gay and les­bian em­ploy­ees.

“[They] are all based upon sound busi­ness judg­ment. And the re­search by McKin­sey, State Street, and Pew, to name a few, sup­ports this,” she said.

Gold­berg, in­com­ing se­nior vice pres­i­dent of the Na­tional As­so­ci­a­tion of State Trea­sur­ers, said NAST would lobby hard to main­tain the tax-ex­empt sta­tus of mu­nic­i­pal bonds and to re­store ad­vanced bond re­fund­ings, which the fed­eral tax-cut law elim­i­nated.

Mas­sachusetts and the na­tion rely in­creas­ingly on for­eign-born work­ers, said Good­man, who called tar­iffs “a lose-lose propo­si­tion for most mar­ket par­tic­i­pants.”

In many re­spects, he added, Mas­sachusetts is as well-po­si­tioned as any state to ride out what­ever comes next, while adding: “Our pol­icy op­tions in the next re­ces­sion will be highly lim­ited.” ◽

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