News ID: 190393
Published: 1115 GMT April 07, 2017

Many states still struggling despite growing US economy

Many states still struggling despite growing US economy

Even with the US economy boasting impressive job growth and domestic equity markets near record highs, a fragmented recovery has left many states struggling to close budget deficits nearly a decade after the 2008 financial crisis.

The broad recovery has benefited large, economically diverse states like California and Texas, ratings agencies say, while states heavily dependent on oil revenues, like North Dakota and Alaska, and those like Illinois that are grappling with large unfunded pension obligations, have seen budget deficits bloom, according to Reuters.

That has left those struggling states with painful decisions over spending cuts and tax increases, and ill prepared to deal with another economic downturn or cuts to federal money tied to the Medicaid program.

S&P Global has downgraded 11 states compared to just two upgrades since January 2016. It has 11 states on negative outlook, which means the ratings agency believes more than 20 percent of states are in danger of a credit downgrade.

The uneven nature of the bounce back is unusual in post-recession US economic history, analysts said.

Half of the states face budget shortfalls despite overall economic growth and lack the revenue needed to maintain services at existing levels in 2018, according to a recent report by the Center on Budget and Policy Priorities (CBPP).

   
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