Staff Report
Published Dec. 8, 2011

Moody’s Investors Service upgraded South Carolina’s AAA credit outlook from negative to stable on Wednesday.

South Carolina was among several states that had outlooks drop in August because of exposure to federal spending cuts. The federal government’s outlook also had been downgraded at the time.

On Wednesday, Tennessee and 119 top-rated municipal issuers also had their outlooks raised from negative to stable. Three top-rated states — Maryland, Virginia and New Mexico — continue to have negative outlooks following Moody’s move on Wednesday, however, as do 36 local governments. None of those local governments is in South Carolina.

A high credit rating means governments pay less to borrow money by issuing bonds.

"Today's actions are based on an expanded evaluation of the exposure each municipality has to the U.S. government, including economic sensitivity to federal spending reductions, dependence on federal transfers and exposure to capital markets disruptions," said Naomi Richman, Moody's managing director.

Moody's analysis includes specific metrics such as federal procurement activity, federal employment and health care employment, as indicators of economic sensitivity. Medicaid expenditures for states and public hospital expenditures for local governments as indicators of direct exposure to federal spending are also considered, along with the presence of short-term debt as an indicator of exposure to capital markets disruptions.

"Issuers with outlooks that remain negative are viewed as having greater exposure to potential cuts in federal employment and federal spending," Richman said.

On July 19, Moody’s considered downgrading the AAA status for South Carolina, Maryland, New Mexico, Tennessee and Virginia; that list came days after the company placed the U.S. government’s AAA bond rating on review because of Congress’ inaction on the federal debt ceiling. Moody’s reaffirmed the states’ AAA ratings in August, but had assigned negative outlooks.