- 26Mar
(Reuters) - U.S. states and local governments are facing their toughest year so far, as rating downgrades continue to outpace upgrades, Moody's Investors Service said on Tuesday.
The first quarter of 2011 marked the ninth consecutive quarter in which downgrades dominated, according to the rating agency."With negative outlooks assigned to all major municipal sectors, the trend is likely to prevail for all of 2011," said Conor McEachern, a Moody's assistant vice president, in a statement.
There were 66 downgrades and 17 upgrades in the first three months of 2011 for a ratio of 3.9 to 1 -- the second highest since the first quarter of 2002 and higher than the full-year 2010 ratio of 2.2 to 1, Moody's reported.
Most notably, the ratings for Nevada and Kentucky fell to Aa2 from Aa1, while Providence, Rhode Island, was downgraded to A3 from A1.
McEachern said states and school districts this year will be facing "weak revenue growth, significant spending obligations and the loss of federal stimulus funding."
Meanwhile, cities and other local municipalities will have to deal with cuts in state aid, dropping property values and diminished budget options, he added.
Other sectors of the $2.9 trillion municipal market will also see ratings pressure, including nonprofit hospitals, private universities, and airports, according to the rating agency.
(Reporting by Karen Pierog; Editing by Padraic Cassidy)
