Moody’s Announces Five States Might See Credit Downgrade

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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