Standard & Poor’s expects continued austerity in fiscal 2013 budgets for US states, which nevertheless will mostly retain their strong credit status:
Our credit outlook for the sector at the start of 2011 focused on the difficult transition to a post-stimulus budget environment. By all accounts, states have made the often-difficult decisions necessary to transition their budgets. For most, the solutions were structural, with less reliance on non-recurring resources and debt issuance and more focus on spending reductions and, to a lesser extent, revenue enhancement.
We believe that this focus on structural solutions in fiscal 2012 will translate to a more favorable budget picture heading into fiscal 2013.
Despite a steady pace of economic recovery for most states through the first two quarters of fiscal 2012, we believe that economic prospects and federal fiscal consolidation present significant uncertainty that could translate into continued budget austerity.
Despite these challenges, we expect the sector as a whole to retain its strong credit profile. In contrast to the federal government and many other governments across the globe, most U.S. states are required by statute or their constitution to adopt a balanced budget. In our opinion, this requirement tends to force budgetary discipline, corrective action on identified budget gaps, and lower leverage.For U.S. State Budgets, Austerity Is Here To Stay
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