KBRA Assigns AAA Rating to State of Maryland General Obligation Bonds

KBRA assigns a long-term rating of AAA with the Stable Outlook to the State of Maryland's General Obligation Bonds.

The rating is underpinned by the State's established track record of conservative budget management; moderate debt and continuing obligations profile; and, a resource base that while slow growing, is characterized by strong educational attainment, structurally low unemployment, and per capita personal income exceeding the national average. The rating places particular emphasis on the proven effectiveness of the State’s budget management framework which is evidenced by consistent maintenance of prudent reserves through the full economic cycle.

The State took decisive action in addressing a challenging $3 billion budget gap heading into the fiscal year beginning July 1, 2025. The gap had arisen due to the need to phase-out the use of extraordinary reserves accumulated during the pandemic and a challenging economic outlook per the State’s highest in the nation dependence on federal employment amid the current federal administration’s focus on cost cutting and reductions in force. The gap was addressed through a combination of revenue enhancements ($1.2 billion), spending reductions ($1.3 billion), and use of reserves and reversions ($0.5 billion). Solutions were primarily recurring in nature and are projected to hold the aggregate state reserve fund and general fund balance steady YoY.

Federal employment cuts in the State have been significant, with headcount reduced 15.3% between January and November of 2025. The unemployment rate nevertheless remains 0.4% below the national average on a seasonally adjusted basis and the absolute level of federal employment remains in line with the level recorded in 2010. While it remains to be seen how deep federal reductions may ultimately cut, KBRA believes this headwind is manageable over the near-term. Furthermore, the State’s proximity to the seat of the federal government in Washington, DC, in KBRA’s view, will continue to confer economic stability and high value-added employment to the State over the longer-term.

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