>Credit Downgrades loom for US states
By Nicole Bullock in New York
Published: February 17 2011 05:01 | Last updated: February 17 2011 05:01
Cash-strapped US states and cities face the prospect of downgrades after Fitch Ratings changed the way it analyses their burgeoning pension bills.
In a report published on Thursday, Fitch warns the new approach could lead to “limited negative rating action”, particularly for local governments with big wage bills. The changes to the way it assesses pension liabilities come amid growing concern over the scale of municipal debt problems and the effect on state and city finances of generous, unfunded public sector pension schemes that will run for many years. Sharp falls in equities and other risky assets during the financial crisis reduced the funding levels of nearly all these pension plans, increasing the pressure on states and local governments when they have even less cash because of dwindling tax revenues to make up the shortfall. Revenues have tumbled while spending has been rising.
https://www.ft.com/cms/s/0/cfadc5fe-3a33-11e0-a441-00144feabdc0.html#ixzz1EGKD3uei
