Depending on what the outcome the federal debt ceiling negotiations is, Moody’s says it may downgrade the credit of five states: Maryland, New Mexico, South Carolina, Tennessee, and Virginia. They are among the fifteen states currently rated Aaa, the highest rating.
The criteria Moody’s used to select the five states:
• Employment volatility due to U.S. factors;
• Federal employment as a percentage of total state employment;
• Federal procurement contracts as a percentage of state gross domestic product;
• Medicaid as a percentage of total state expenditures;
• Puttable variable rate debt as a percentage of available resources; and
• As a mitigant to those risks, available operating fund balance as a percentage of operating revenue.
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