Comparingthe falloff in state tax revenue to shifts in total unemployment.
(Chart: Moody’s)
Credit-rating agencies — particularly Moody’s and S&P, the
nation’s two premier shops — wield significant influence over the
financial health of private companies. But state and local officials are
often equally dependent on good credit ratings to borrow money for
transportation and infrastructure improvements.
Even the federal government monitors its credit outlook to a degree
that might surprise the average voter. When Moody’s suggested
last month that the mounting deficit might imperil America’s AAA
rating (the highest available), Treasury Secretary Tim Geithner leapt
to the defense of Washington’s fiscal health.
So which states do credit raters believe are weathering the
recession, and which will continue to struggle with yawning deficits
that jeopardize their ability to invest in transportation and
infrastructure? Bob Kurtter, manager of Moody’s state ratings team,
addressed the question last month during a speech at New York
University’s Institute of Public
Knowledge.
Only two states, California and Illinois, have seen their credit
downgraded in recent months, Kurtter said. Negative credit outlooks have
been issued for 15 more states, and two are benefiting from positive
credit outlooks: West Virginia and Louisiana.
Why are things looking rosy for those two governments?
“They got buffered on the early part of this downturn” thanks to
their reliance on coal and oil production, Kurtter said. The two states
“both have very conservative administrations that have managed pretty
aggressively.”
When states can reap credit gains by doubling down on fossil fuels,
it’s easy to see why coal- and oil-state lawmakers are resisting
legislative action on climate change. Take West Virginia Sen. Jay
Rockefeller (D), a longtime
supporter of transportation reform who today
proposed to block the Environmental Protection Agency from reining
in emissions for two years — a delay twice as long as what many
Republicans had
endorsed.
