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ROCKVILLE, MD (May 24, 2023) – Montgomery County officials credit the county’s record of Triple-A bond ratings to fiscal policies that have helped them maintain a high level of reserves, even through the COVID-19 pandemic. But the county’s high reserve levels have little effect on its credit rating and could impose an excessive burden on its taxpayers, according to a new analysis for the Maryland Public Policy Institute.
 

Montgomery County is, in fact, giving too much credit to its high reserves for its Triple-A bond ratings, and “could get the same prestige and low interest rates without holding onto money taxpayers could otherwise use,” according to policy analyst Marc Joffe of the Cato Institute, who conducted the analysis for the Maryland Public Policy Institute.
 

Joffe’s analysis found that 70 percent of ratings calculations by agencies Moody’s and S&P have nothing to do with reserves. Given its strong economy and the other “cash cushions” in Montgomery County’s balance sheet, the state’s most populous county does not need to maintain 10% of total government fund revenues in its reserves; it can significantly reduce this without violating recommended best practices or losing its decades-long record of Triple A bond ratings.
 

Joffe notes the cost to citizens when the county keeps reserves needlessly high: “Those balances ultimately come from taxpayers and sustaining them when spending is at a high-level means governments often must raise tax rates or at least avoid lowering them.”