Standard & Poor's: state budgets to remain tight for another year.(News & Numbers)(Brief Article)

State economic recovery is under way, but it has been uneven and below average in many areas of the country, according to a report released in April by Standard & Poor's Ratings Services.

A review of fiscal 2005 state budget proposals indicates that while revenue recovery is proceeding, structural budget balance has not returned for many states, and there will be limited progress in restoring reserves. Fiscal 2005 marks the fourth consecutive year that budget deliberations have focused on imbalances for a majority of states.

"While most states are experiencing economic and fiscal recovery, there is still some downside risks to state budgets and revenue performance that could continue to exert near-term pressure on credit, and delay the return to a positive credit environment over the longer term," said Robin Prunty, a Standard & Poor's credit analyst.

Standard & Poor's has evaluated the proposed fiscal 2005 budgets for the states and found there are many issues and trends that have evolved over the past several years of budget imbalance. These factors will require analytic focus, will ultimately determine the direction of the seven states on negative outlook this year, and will be a factor in the credit profile of this sector for years to come. For those states on negative outlook, the conclusion of the 2005 budget process will likely be the significant factor in the outcome of the rating.

The report, titled "Public Finance Report Card: The U.S. States," is available on RatingsDirect, Standard & Poor's Web-based credit research and analysis system.

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