Following the Aug. 5, 2011 downgrade of the U.S.sovereign debt rating to ‘AA+/Negative’, Standard &Poor’s Ratings Services said the action would not trigger automatic rating downgrades beyond those that moved in

lockstep with the sovereign rating. We reiterated that, pursuant

to our criteria, certain state and local government ratings could

remain or be assigned at the ‘AAA’ level (see “State And Local

Government Ratings Are Not Directly Constrained By That Of

The U.S. Sovereign,” on p. 42). This does not mean there are

no credit implications from recent events, however.

67 www.creditweek.com

State And Local Governments Face Fiscal Challenges Under Federal Debt Deal

features special report

■ Federal deficit reduction could complicate state and local government fiscal management

■ Initial cuts under the Budget Control Act appear to be smaller than the revenue losses from the Great Recession

■ Budget management may prove to be integral to maintenance of credit quality

Overview