The report’s name says it all: “For U.S. State Budgets, Austerity is Here to Stay.”
“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,” the report states.
During the past several years, most state governments have made difficult spending and revenue adjustments, which has helped the sector achieve relative credit stability. However, fiscal conditions remain strained and budget reserves are “significantly depleted,” which limits budget flexibility, according to S&P.
“The ability and willingness to adjust to economic volatility, revenue contraction and potential funding or policy changes at the federal level will determine credit direction heading into fiscal 2013,” the report states.
The report also includes information on each state’s budget situation.
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