Moody's: U.S. rating cut to AA1 from AAA.

Moody's: U.S. rating cut to AA1 from AAA.

Ann Arbor, Md. — Maryland's long-standing AAA bond rating from Moody's has been downgraded to Aa1, reflecting the state's economic and financial underperformance compared to other top-rated states. This downgrade, effective immediately, comes after more than five decades of maintaining the highest possible rating.

The downgrade was announced by Moody's on Wednesday, May 14, 2025, citing Maryland's heightened vulnerability to shifting federal policies and employment, as well as its elevated fixed costs. The state had previously benefited from the AAA rating, allowing it to secure lower borrowing costs for infrastructure projects such as roads and schools.

Governor Wes Moore and other leading Maryland Democrats attributed the downgrade to the Trump administration's mass layoffs of federal workers, which have significantly impacted the region. They noted that the state has closed its budget gap through tax increases, budget cuts, and fund transfers, but remains exposed to the economic consequences of federal funding cuts and layoffs. The state's creditworthiness has been acknowledged by Moody's despite these challenges.

Maryland Republicans, however, blamed the downgrade on reckless spending, bloated budgets, and an economy hollowed out by overregulation and overreliance on the federal government. They criticized the Democratic administration for failing to address these issues.

The downgrade could lead to higher interest costs for Maryland's borrowing, potentially impacting the state's ability to fund essential services and infrastructure projects. The next bond sale is scheduled for June 11, and the state will now face a higher cost of borrowing due to the downgrade.

The Moody's downgrade follows a similar move by the agency in 2025, when it downgraded the District of Columbia's rating from AAA to AA1, citing impacts from federal workforce reductions and weakening demand for commercial real estate.

References:
1. [https://www.usnews.com/news/us/articles/2025-05-14/maryland-loses-triple-a-bond-rating-from-moodys-rating-agency](https://www.usnews.com/news/us/articles/2025-05-14/maryland-loses-triple-a-bond-rating-from-moodys-rating-agency)
2. [https://marylandmatters.org/2025/05/14/maryland-loses-coveted-aaa-bond-rating/](https://marylandmatters.org/2025/05/14/maryland-loses-coveted-aaa-bond-rating/)
3. [https://www.wbaltv.com/article/politics-maryland-loses-aaa-bond-rating-credit-downgrade/64770805](https://www.wbaltv.com/article/politics-maryland-loses-aaa-bond-rating-credit-downgrade/64770805)