Moody’s Announces Five States Might See Credit Downgrade

July 19, 2011

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.

See more about state taxes here.

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