Now It Costs More to Borrow
Whenever a rating agency lowers their estimate of the ability of a state to pay back its bonds, the interest rates the state pays go up. Moody’s just lowered its rating for Rhode Island.
Moody’s Investors Service has downgraded the outlook on Rhode Island bonds to negative from stable because of “the potential impact of rapidly escalating pension costs on the state’s ability to increase its liquidity margins, diminish its reliance on one-time measures to balance its budget and reduce its debt burden.”
Moody’s added, “The state’s pension costs are set to double in two years by an amount that roughly offsets its budget reserve account, raising the likelihood that it will continue to face significant budgetary pressures…”
That means all those transportation bonds we Rhode Islanders love to pass (because, ya know, we gotta have roads!) will cost more over the long term. Smart states budget transportation, they don’t bond it. For years, we’ve dealt with sacrifices to the quality of basic government services that most state taxpayers actually use–indeed, require–like roads, bridges, the DMV, etc. While other budget items have continued to increase, either with state or federal (it’s magic!) dollars.
For his part, Governor Chafee recognizes this and is trying to find ways to get off the transportation bond wagon. Unfortunately, his ideas revolve around paying tolls or mileage taxes. That’s a non-starter, too. Just like his call to add more workers to the DMV. Maybe we should make Twin River a full-on casino and devote some of that revenue to transportation. Or we could just re-prioritize the state budget–baseline it–and go from there. Doubt that will happen.