By EMERSON LYNN

The agencies that downgraded Vermont’s bond rating this year were the targets this week of Vermont legislative leaders who claimed the bond rating agencies had a bias against small rural states and failed to acknowledge much of the good work the state has accomplished.

They have a point. If the agencies drop their ratings because a state is small, or has a rural population, a Catch-22 situation develops; the cost of borrowing increases, which makes it harder for states losing population to counter what it is that’s causing the decline.

Senate Pro Tem Tim Ashe makes the point that the Senate could not complete its efforts to invest in a $50 million housing bond last session because of the fear the extra debt would prompt the rating agencies to drop the state’s bond rating even further, which would raise the state’s borrowing costs.

The housing bond would have yielded “hundreds” of affordable housing units, something the state desperately needs to attract growth. If we can’t build them how do we address the demographic decline that prompted [among other things] the agencies to drop our bond rating?

Mr. Ashe also makes the point that the rating agencies should place a higher priority on things such as poverty rates, educational systems and their environmental reputations.

The point is worthy of discussion, but probably to no avail. Judging the quality of a state’s school system is highly subjective, as is a state’s environmental stewardship. It’s also questionable as to how Vermont would fare. We do relatively well in the preK-12 realm, but do horribly with our higher education efforts. How would that square for a rating agency? How do you judge the effectiveness of a clean water initiative? Do states get points the closer they get to a 100 percent renewable energy status? [No, but maybe they should?]

The agencies’ processes will always be imperfect, which is what prompts them to limit their considerations to as few items as possible, and fundamental ones. Like the ability to repay one’s bills. Like the size of a state’s unfunded pension liabilities [thank you Howard Dean, etc.] Like being on the low, low end of the growth curve.

There are few Vermonters with more experience in the bond rating game than David Coates, who used to represent the state for years before the rating agencies. In a Vt. Digger story he was quoted as saying: “There is some prejudice out there with a small state like ours, particularly when we have a population that’s not growing. But saying that, I think we were lucky to keep the AAA for as long as we did….As much as I love the state of Vermont…I just don’t see that bright a future.”

There is a nexus in the space between Mr. Ashe’s concern about the agencies’ narrow focus and Mr. Coates’ pessimism: Vermont may have no choice but to increase its risk and make the investments necessary to grow. If Vermont is to have a “bright future” we may have to attach less importance to a bond rating and more to what’s required to regain that AAA rating in future years, otherwise how is it we avoid the inevitable decline [and lower bond ratings] that come with little to no growth?

Mr. Ashe has a pivotal role in this process. He, along with his colleagues, needs to have growth [and all that includes] foremost in his mind as he steers the legislative agenda next session. How can the unfunded pension liabilities be dealt with more effectively? What investments spur growth? How do we battle our high costs? He might find it useful, and revealing, to ask himself where one goes in Vermont to even inquire about new growth ideas, or innovation, or to figure out what slows what we have. If he finds it, let us know. We haven’t been able to.

That’s the bottom line message from the bonding agencies: What they are looking for from Vermont is something to which we’ve attached little importance.

That needs to change, which will require a little more risk. And that’s okay.