Massachusetts Given Lowest Credit Rating in the Nation

Massachusetts’ credit rating has dropped below Louisiana to the lowest for any state, and a financial official says a “junk bond” rating is possible if the Legislature fails to raise taxes.

Standard & Poors dropped Massachusetts’ long-term debt rating Wednesday from A to BBB.

Cathy Daicoff, S&P;’s managing director of municipal finance, said that put Massachusetts a step below Louisiana, which is rated BBB Plus.

Just a year ago, the state had one of the nation’s highest credit ratings and Gov. Michael S. Dukakis was waging a presidential campaign based on what he called “the Massachusetts Miracle.”

Since then, tax revenues have fallen far below projections because of a weakening housing market, a softening computer industry and a drop-off in retail sales. Spending also has increased more than planned, primarily in welfare entitlement programs and health insurance for state employees.

Moody’s Investors Service, the other major rating service, dropped Massachusetts last month from A to Baa 1, tying it with Louisiana as the lowest-rated state in the nation. Moody’s did not change its rating this month.

Administration and Finance Secretary L. Edward Lashman said the bonds still carry an investment-grade rating, which allows them to be purchased by big buyers, such as major pension funds.

But they could fall below that to the category known as junk bonds, he said.