Debt Ceiling Crisis Threatens State Budgets, Credit Ratings, Governors Furious
This week, Moody's Investors Service warned that it probably will lower the credit rating on five states if it downgrades the U.S. government's credit rating. The firm concluded that Maryland, Virginia, South Carolina, Tennessee and New Mexico would be most at risk.
"I'm very unhappy. In fact, we're furious," said Virginia Gov. Bob McDonnell. The Republican pointed out that the state's triple-A credit rating has been in place since 1938, and that it potentially could be lowered through no fault of the state's.
While state officials said the actual cost of a downgrade won't break the bank, they're not happy about the possibility of paying higher borrowing costs after years of budget cuts. They also worry about the economic impact of federal employees potentially not getting paid, or the government not going ahead with contracts or being able to make Medicaid payments.