Bloomberg News

States and Localities at Risk From Supercommittee, Kurtter Says

November 09, 2011

(For more news from the Bloomberg State and Municipal Finance Conference, see {EXT2 <GO>}.)

Nov. 2 (Bloomberg) -- State and local governments face the risk of U.S. funding cuts by the supercommittee charged with shrinking the federal budget deficit, said Robert Kurtter, managing director for state and regional credit ratings at Moody’s Investors Service.

“Moody’s is now seeing more risk because we know the downsizing is coming and it will affect localities,” Kurtter said today at the Bloomberg State and Municipal Finance Conference in New York.

Entitlement programs such as Medicaid, the largest budget item for many states, will be cut, said John Hallacy, head of municipal research at Bank of America Merrill Lynch Global Research.

The congressional supercommittee, which began meeting Sept. 8, must find $1.5 trillion of spending cuts or revenue increases over 10 years. If it fails to meet a Nov. 23 deadline, $1.2 trillion of automatic reductions will be made, about half from the military.

“The supercommittee isn’t going to be able to come up with new cuts,” said Hallacy. “We’re going to default to the $1.2 trillion of automatic cuts.”

--Editor: Jerry Hart, Stephen Merelman

To contact the reporters on this story: Pimm Fox in New York at pfox11@bloomberg.net Darrell Preston in Dallas at dpreston@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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