Moody’s Says U.S. State Outlook Stable as Economy Lifts Revenue

  • While oil takes toll on some, others can handle the drop
  • States cut spending and raised taxes after the recession

Moody’s Investors Service said it is keeping a stable outlook on the ratings of U.S. states as the economy’s expansion boosts government tax collections.

State revenue growth is anticipated to hold steady at about 4 percent in 2017, Moody’s said in a statement Monday, even as energy-dependent states including Alaska and Louisiana face budget deficits because of the decline in the price of oil over the past two years. The company said the impact has been less severe on those such as New Mexico and Texas with more diverse economies.

States have largely recovered from the toll of the 2007-2009 recession, which forced them to cut spending and raise taxes when expected revenue disappeared. Unlike local governments, states have "broad power" to steady their finances to weather economic routs.

“States have a number of tools to manage budgets and maintain liquidity, which reflect their sovereignty and an ability to create their own fiscal frameworks," Nicholas Samuels, a Moody’s vice president, said in the statement.

Moody’s said the outlook could be upgraded to positive should states show sustained annual revenue growth of more than six percent, while a significant revenue shortfall could lead to a negative outlook.

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