NEW YORK--(BUSINESS WIRE)--Fitch Ratings' 2011 outlook for the U.S. state government sector is negative as states face fiscal challenges in an environment of reduced financial flexibility. Key issues facing states in 2011 are the expiration of federal stimulus funds that have supported operating budgets, the slow pace of tax revenue recovery in most places, and the continued elevated demand for state services.
'Although we expect that the credit quality of states will remain very strong and that most states will continue to be rated 'AA' to 'AAA', there's a likelihood of an above-average number of incremental downgrades or negative rating outlook revisions this year,' said Laura Porter, Managing Director at Fitch. 'Actions taken by states in 2011 will be key indicators of the strength of fiscal management.'
Fitch expects 2011 to be a decisive year for state credit. Although economic and tax revenue performance is improving slowly, budgets for fiscal 2012, which begins on July 1 for most states, will be for many arguably the most difficult since the downturn began.
Fitch says states will face more difficult options in confronting budget challenges, as most drew down reserves in the downturn and have already exhausted the more palatable available budget management actions. In addition, an anti-tax environment nationwide limits revenue-raising opportunities, and many states will need to increase contributions to pension systems.
Fitch will host a teleconference on its 2011 U.S. States and Tax-Supported outlooks on Thursday, Jan. 27th at 11:00am EST. Laura Porter, head of Fitch's U.S. States Ratings group and Amy Laskey, co-head of Fitch's U.S. Tax-Supported team will lead the call. A Q&A session will follow their remarks.
To participate in this teleconference, interested parties should call +1-877-713-4667 (domestic) or +1-706-634-1958 (international) five minutes prior to the 11am EST start time and give the conference ID# '39099409'.
A replay of the teleconference will be available starting two hours after the teleconference is completed and will be available until Feb. 27th close of business. To listen to the teleconference replay, participants should call +1-800-642-1687 (domestic) or +1-706-645-9291 (international). The conference ID number for the replay is '39099409'.
Fitch's special report titled '2011 Outlook: U.S. States' is available on Fitch's website at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2011 Outlook: U.S. States
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600389
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