AUGUSTA (AP) – As the state prepares for a $143 million spring bond sale, Fitch Ratings on Friday became the second Wall Street agency this week to drop its rating for Maine’s general obligation bonds.

“The downgrade reflects the state’s financial pressures in recent years, depletion of reserves, and a continuing structural imbalance, enlarged by assumption of a larger share of educational costs,” a Fitch statement said.

Pegging a funding gap at more than 10 percent of projected revenue, the statement said: “Cost reductions and operating efficiencies have been imposed, but such actions are insufficient, leading to planned use of one-time measures, which fail to address the long-term problem.”

Fitch said it was downgrading the state’s outstanding general obligation to AA from AA+, and assigning an AA rating to bonds expected June 6.

On Tuesday, Moody’s Investors Service announced it was downgrading Maine’s general obligation bonds from Aa2 to Aa3, citing slow progress in restoring depleted reserves, “continuing tight liquidity position leading to four years of cash flow borrowing,” and the use of one-time solutions in balancing the state’s operating budget.

Baldacci administration officials say the financial impact of lowered ratings would probably be modest.

The action by Fitch and Moody’s, with an announcement by Standard & Poor’s believed to be pending, comes amid increasing discussion at the State House over whether, and if so how, to alter or replace a controversial $450 million revenue bonding provision in the new $5.7 billion two-year state budget slated to take effect on July 1.

Critics led by some Republican lawmakers have launched a petition drive aimed at forcing a people’s veto referendum on the provision in November. Gov. John Baldacci and his allies within the Legislature’s Democratic majorities have been looking at potential revisions to the budget’s borrowing plan.

Responding to the Fitch statement Friday, Baldacci administration officials highlighted a portion of the statement that said: “Maine continues to have a strong debt position, with all general obligations due within 10 years. Net tax-supported debt of $823 million is equal to $630 per capita, 0.8 percent of full value and 1.9 percent of personal income, very moderate ratios. Should the pension bonding take place, debt would remain moderate.”

Baldacci budget chief Rebecca Wyke, the administration’s commissioner of administration and finance, said state government is rebuilding its cash reserves and noted that, while Maine has not raised broad-based taxes, revenue for the current fiscal year will exceed projections.

Wyke said a Standard & Poor’s rate lowering for a previous bond sale had negligible effect. At worst, she suggested, any rating drop could add $10,000 to $15,000 per year to state costs.

Fitch made reference to the pending state budget in its Friday statement, indicating that scrutiny continues.

“The adopted budget for 2006-2007 includes $450 million pension obligation bonds to fund biennium pension requirements,” Fitch noted.

“This frees up resources to fund $250 million of increased education cost, with the remainder intended for reserve rebuilding and reduction of the accrued pension liability. State policy seeks to reduce the structural gap during the biennium, with the operational portion of the pension bonds acting as a bridge. However, the borrowing is being reconsidered, leading perhaps to alternate strategies. Rebalancing actions will be important to prevent further credit weakening,” Fitch said.

AP-ES-05-27-05 1745EDT