For U.S. States, A More Positive Tone Emerges For Fiscal 2019 Budget Process; Can It Last?

Source: S&P Global Ratings, May 1, 2018
(subscription required)

With the economy settling into the mature phase of its nearly nine-year expansionary cycle, the approaching fiscal 2019 budget picture for U.S. states is more sanguine than it has been in several years. Not only are revenue collections in most states higher than at this point in 2017, tax receipts are also surpassing fiscal 2018 budget estimates.


Credit Conditions: U.S. State And Local Government Are Experiencing An Upswing, But New Risks Could Threaten The Momentum
Source: S&P Global Ratings, April 26, 2018
(subscription required)

With economic growth accelerating, credit conditions across the U.S. state and local government sector continue to firm. The current expansion, which was already entering the mature phase of the cycle, received additional support in the form of federal fiscal stimulus (tax cuts and increased spending) in recent months.

Level U.S. State Debt Reflects Long-Term Management Strategies And Affordability Concerns
Source: S&P Global Ratings, May 14, 2018
(subscription required)

Despite elevated credit pressures in fiscal 2017, state debt levels for the most part stayed constant. Although we anticipate more positive credit conditions heading into fiscal 2019, we think it is unlikely that there will be a significant uptick in debt levels.