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WEDNESDAY'S EDITORIAL

Credit rating downgrade is a warning

THE ISSUE: S.C. loss of top credit rating

OUR OPINION: Downgrade by Standard and Poor's is warning for leaders

The news set off a new round in the blame game.

After a year of maintaining South Carolina's AAA credit rating even while expressing concern about the state's economic outlook, Standard and Poor's Ratings Services on Monday downgraded the state's rating to AA-plus.

The step down drops the state from an elite class of nine states considered top-tier bond issuers. As much as the action could force taxpayers ultimately to pay more to borrow money, the practical effect may be negligible in the short term.

The primary danger of the downgrade is the prospect of a ripple effect with other rating firms. In March, Moody's Investor Service reaffirmed South Carolina's Triple-A credit rating as the state prepared to sell $74.7 million in economic development bonds. And Fitch Ratings continues to award the state its top rating.

The concerns expressed by Standard and Poor's are more a source of long-term worry.

In Monday's report, the ratings service applauded the state for working to strengthen its finances and for not adopting a proposal by Gov. Mark Sanford to cut income taxes. But "the state's overall economic base has not kept up with regional growth," analyst Eden Perry said in an Associated Press report. In particular, the state is not generating enough jobs and its unemployment rate is the nation's sixth highest.

Standard and Poor's previously expressed concern about the viability of Sanford's tax plan and the ability of the state to afford it. The new action all but dooms the idea of cutting income taxes as a top priority, particularly since the Legislature has shown more interest in reducing property taxes.

The political shots at Sanford by Democrats in the wake of the credit downgrade are predictable.

Clarendon County Sen. John Land, the upper chamber's minority leader, said, "We are in the midst of a job crisis and this governor has done nothing about it. Riding a bicycle and whitewater rafting doesn't cut it when it comes to bringing jobs to South Carolina." Land even suggested Sanford give up plans to seek re-election.

For his part, the governor blames the Legislature, saying he has been unable to get through initiatives to boost the state's economy.

And therein is our concern. This is not a governor battling a General Assembly on partisan terms. This is a governor whose party is in solid control in both houses. The lawmakers and the governor just don't seem to be able to get on the same page.

The Standard and Poor's action is not likely to derail Sanford in his re-election bid. It even may not be a long-term problem. But it is a voice of warning that the state's leaders need to find common ground on strategy to grow South Carolina's economy.