Outlook improves to stable amid stronger budgetary picture and federal support

Source: Matthew Butler, Emily Raimes, Nicholas Samuels, Timothy Blake, Moody’s, March 11, 2021
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The outlook for US states has improved to stable from negative based on stronger state finances and continued economic and fiscal support from the federal government. Most states have lifted their revenue forecasts for the current fiscal year 2021 and upcoming fiscal 2022, reflecting stronger revenue collections than anticipated at the start of fiscal 2021 (began July 1 for most states). The improved revenue performance, which we expect to continue based on current macroeconomic forecasts, will accommodate budgeted spending and retention of financial reserves. A further fiscal support measure passed by Congress this week will additionally spur consumer spending and, in turn, bolster state tax revenue, as well as provide direct financial aid to states to help cover costs associated with the pandemic.