...In April ####, Moody s revised its outlook for the U.S. state gov ernment sector to negative. The economy has weakened substantially since then, compounded more recently by a severe credit and liquidity crisis. While the credit market slump poses short-term risks for some states, particularly ones that rely on cash flow borrowing, the long-term credit quality of states will be more challenged by the current economic downturn. Already weak state revenues are expected to decline further during the next year, particularly per sonal income and sales taxes. During the next ## months, leaner finances will compel states to balance their budgets through expenditure reductions, the use of reserves and other non-recurring actions, as well as the possibility of revenue enhancements. Moody s continues to maintain a negative outlook on the state government sector as a whole. In addition, Moody s curr ently has negative outlooks on six states. Despite these outlooks and the challenges...

Report Type: Special Comment
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 Moody's Global Credit Research
Moody's Investors Service, a leading global credit rating, research and risk analysis firm, publishes credit opinions, research, and ratings on fixed-income securities, issuers of securities and other credit obligations. Credit ratings and research help investors analyze the credit risks associated with fixed-income securities. Ratings also create efficiencies in fixed-income markets and similar obligations, such as insurance and derivatives, by providing reliable, credible, and independent assessments of credit risk. For issuers, Moody's services increase market liquidity and may reduce transaction costs.