COLUMBUS Ohio maintains credit ratings

S & amp;P says some risks remain in the state's budget structure.
By JEFF ORTEGA
VINDICATOR CORRESPONDENT
COLUMBUS -- The nation's main credit rating agencies have kept Ohio's rating at their next-to-highest levels, the state budget director said Thursday, a development that should save taxpayers interest on the money the state borrows.
"We are cautiously optimistic, but we are pleased with our rating," state budget director Tom Johnson said.
Since the state's adoption of a two-year, $48.8 billion budget last month, Johnson said Standard & amp; Poor's has maintained Ohio's credit rating as AA plus and improved the state's outlook from negative to stable.
Johnson, appointed by Gov. Bob Taft, said Fitch Ratings has maintained Ohio's rating as AA plus and also indicated that it viewed the state's rating as stable.
Moody's Investors Service has maintained Ohio's rating as AA1, but has not changed the credit outlook from negative.
If the state's credit rating had dropped one level, the state could have ended up paying millions of dollars more in interest on the money it borrows.
"It could have cost $227 million more over a 20-year period," Johnson said. The state borrows about $1 billion a year.
Based on budget
Standard & amp; Poor's said it based its determination on the Legislature's passage of what the ratings firm called a "structurally balanced" state budget that features a temporary 1-percent state sales tax increase.
The temporary tax is expected to generate about $2.5 billion in new revenue over the next two years. It is to end June 30, 2005, the same time the current state budget expires.
The ratings agency characterized state spending during the two-year budget period as tight with spending growth anticipated in Medicaid, the state-federal health insurance program for the poor and disabled; primary, secondary and higher education and debt service.
"There remain some evident risks in the budget, such as the state's largely untested ability to cut Medicaid eligibility and benefit levels.
"In addition, the adequate funding of education remains a challenge for the state since the Ohio Supreme Court ruled in November 2002 that the state's education funding system remains unconstitutional," S & amp;P said.
The state will appoint a special committee to recommend changes.
S & amp;P also noted the state used most of its cash reserves to balance the state budget. At one time, the so-called "Rainy Day Fund" stood at more than $1 billion. State officials say it is now at $180.7 million.
Officials from the other ratings agencies couldn't immediately be reached.