Maine's $389 million in outstanding general obligation bonds were downgraded by Moody's Investors Service to Aa3 from Aa2, with a stable rating; one of the reasons cited was potential state pension funding problems.
The state plans to issue around $440 million in pension bonds as part of a plan to close an expected $806 million gap in the 2006-2007 budget, and use $125 million of the proceeds to fund the state's mandated pension contributions over the 2006-07 fiscal years, Moody's analyst Nicole Johnson said. The remaining proceeds would be used to reduce the state's unfunded pension liability.
She said the bond issue is subject to a "people's vote," and if enough valid signatures are gathered before June 28, the bond issue will be put to on a statewide referendum in November, delaying the state's ability to close its budget gap.
Maine Treasurer David Lemoine did not return phone calls seeking comment.