New Jersey, California and Florida are among states that may face credit-rating or outlook cuts as tax receipts trail budget projections, raising pressure to trim spending, Moody’s Investors Service said.
“Persistent state fiscal pressures, aggravated by additional federal spending reductions or further weak economic or employment performance, may force mid-year budget cuts in 2012,” Ted Hampton, a Moody’s analyst in New York, said in a report. The situation would “possibly increase downward rating pressure for some states,” he said.
California revenue missed forecasts by 3.6 percent, or about $705 million, in the first quarter of fiscal 2012, Controller John Chiang said last month. The shortfall increases the chance that automatic spending cuts will be triggered, affecting universities and services to the elderly and disabled. Florida lawmakers were told Oct. 20 that the state faces a $1.2 billion 2013 budget gap, after first-quarter revenue for the current year came in $125 million short of estimates.
Revenue rose in Florida compared with the year-earlier first quarter, while it fell in California, the state reports show. Receipts also missed projections by 3.6 percent in New Jersey and 3.5 percent in Pennsylvania, Hampton said, adding that no “immediate rating actions” are anticipated.
“Economic assumptions used in assembling budgets may have been overly optimistic,” Hampton said in the report, dated Nov. 1. In New York, revenue fell short of budget forecasts by 1.2 percent in the first half of the fiscal year that began in April, even as tax receipts jumped almost 13 percent from a year earlier, he said.
States such as Texas, Georgia, Illinois, Ohio and North Carolina have met or beaten revenue estimates, Hampton said.
During the past four budget cycles, states have cut more than $530 billion from spending plans, including those that cover the current fiscal year, as revenue fell amid the longest recession in seven decades, the Center on Budget and Policy Priorities said in June. The Washington-based nonprofit organization focuses on issues affecting lower-income Americans.
Since 2008, Standard & Poor’s has lowered credit ratings for Arizona, California, Illinois, Nevada and New Jersey.
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