'In the last two months Fitch has taken two rating actions on state GO credits, downgrading
The New Jersey GO downgrade was triggered by the scale and lateness of the fiscal 2014 revenue shortfall and the state's likely use of one-time measures to address the gap due to its extremely narrow financial reserves. The downgrade also incorporated the state's ongoing budget strain created by overly optimistic revenue forecasts, a multitude of long-term spending pressures, and the state's repeated reliance on one-time solutions to achieve budgetary balance. Minimal cash balances have been maintained in recent years, providing limited flexibility to absorb unforeseen needs or revenue under-performance.
For all U.S. states, fiscal 2015 budget forecasting has been cautious after 2014 misses. States have less one-time money to spend at the close of fiscal 2014 than they did this time last year and, in fact, negative 'April surprises,' due to an underestimate of the revenue boost from last year's federal tax changes, required budget retrenchment in some states. The underperformance proved manageable in most states within the standard budget processes.
State employment levels are gradually returning to pre-recession peak levels, though the pace has been slow and recovery is not as far along as might be expected given the recession officially ended nearly five years ago. Through
For more information, a special report titled 'U.S. Public Finance Credit View: States' is available on the Fitch Ratings web site at www.fitchratings.com, or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
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