For almost a century, between the late 1890s and 1986, coal miners relied on canary birds rather than fellow miners to detect increasing levels of colorless, odorless carbon monoxide and other toxic gases in the mines that could sicken or even kill humans.
While mechanical sensors have long since replaced canaries in mines, the term “canaries in the coal mine” is still a metaphor for an early warning system to alert people of impending negative, even catastrophic outcomes, if they do not make necessary and timely changes.
Recent news reports on three “canaries in the coal mine” scenarios that merit serious consideration by Governor Moore and the leadership of the General Assembly.
The first are reports published in Maryland Matters that recent decisions on the state budget made by a majority in the General Assembly and by Governor Moore have not gone unnoticed by three major public finance credit rating agencies — Fitch, Moody’s, and S&P Global Ratings.
In the world of government finance, the ratings from these firms are of paramount importance.
They determine the interest rates on bonds issued by states to fund budgets in addition to revenue received from taxes and related revenue sources. The higher the states bond rating, the lower the interest rate on bond repayments.
While these bond agencies reaffirmed the currently in place highest credit rating for Maryland (AAA), two did so with concerns.
Moody’s downgraded the state’s fiscal outlook from stable to “negative,” citing looming structural deficits driven by state funding for the Blueprint for Maryland’s Future also known as the Kirwan Plan.
In their report, Moody’s wrote, “The negative outlook incorporates difficulties Maryland will face to achieve balanced financial operations in coming years without sacrificing service delivery goals or adding to the weight of the state government’s burden on individual and corporate taxpayers.”
This is the first time since 2011 that Moody’s has issued a negative outlook for Maryland.
Their report notes, “The outlook revision was driven by expected structural imbalances and planned depletion of General Fund surplus and budgetary reserves by about 60% from fiscal 2023 through fiscal 2025, which threatens to undermine performance relative to peers.”
In their report, S&P Global Ratings, expressed concerns about deficits and costly programs. Those concerns led them to grade Maryland nearly in the middle of their its rating system — a grade that would typically equate to a credit rating just below AAA. But the agency gave the state the benefit of the doubt citing its history of fiscal management.
The second “canary in the coal mine” are reports from the General Assembly’s nonpartisan legislative budget analysts. They are projecting that by next year, the state’s projected structural budget deficit — the gap between projected expenses and expected revenues – will grow to $1 billion. In fiscal 2027, the last year of Moore’s term, it grows to $1.3 billion. A year later, it more than doubles to $3 billion.
The third “canary in the coal mine” are recurring reports from Delaware about businesses moving or planning to move their business incorporation domicile from Delaware.
The latest to do so is Affirm Holdings Inc., a publicly held American technology firm that handles financial services for merchants and shoppers. Affirm is one of at least twenty major companies citing a hostile Delaware business environment as the reason for their decisions.
Affirm joins Facebook parent company Meta, Walmart, Tripadvisor, The Trade Desk, and Roblox.
In the face of all this news, one has to question the impact of a recent compromise reached by the leadership of the Maryland General Assembly and Governor Moore on a final state budget and state tax package.
That compromise did not include a proposed reduction in the corporate net income tax, but did include a new 3.5 % sales tax on information technology service providers.
A spokesperson for Governor Moore has said the governor is still optimistic going forward, saying the governor “remains confident” in the state’s fiscal position following the news on the three credit ratings. He also said the governor will work with lawmakers on “long-term structural solutions” that balance revenues with priorities.
State Senate Budget and Taxation Chair Guy Guzzone is also optimistic. He was quoted in a Maryland Matters article, “I know we can figure it out and we will figure it out. Whatever the circumstances, whatever the economy gives us, in a broad sense, we’ll use our tools and we’ll be thoughtful, and we’ll come up with, I believe, good solutions.”
Time will tell if the current news from Delaware projected deficits and credit rating concerns will be included in future dialogue and deliberations on state spending and state revenues which in turn will help ensure fully informed decisions will be made on future state budget decisions in Annapolis.
We are likely to know very soon.
The final approved state budget bill requires a special legislative session later this year to address unexpected impacts in Maryland on more reductions in federal government spending.
If and when that occurs, I suggest Marylanders deserve thoughtful consideration of the current canaries in the coal mine as well as unexpected others yet to be made known.
David Reel is a public affairs and public relations consultant in Easton.
Write a Letter to the Editor on this Article
We encourage readers to offer their point of view on this article by submitting the following form. Editing is sometimes necessary and is done at the discretion of the editorial staff.