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Bailey McCann, Opalesque New York: Conning, a global investment firm, has released its semi-annual State of the States municipal credit research report, which reveals growing concerns for state credit quality. The report shows a number of risk factors that could impact municipal bond investments - a market segment popular with credit managers and institutional investors.
In several states, political infighting is hampering legislatures’ ability to reform structural deficits, while high tax states have experienced diminished capital gains tax revenues. Persistently low oil prices continue to put pressure on state revenues in the oil patch states. Additionally, a low yield investment environment is compelling states to contribute more to underfunded public pensions, placing further strain on limited budgets.
"Tax revenues are slowing while state expenditures are picking up, resulting in a drop in aggregate state reserves. General Fund balances, an important measure of a state’s fiscal health, have also declined," says Paul Mansour, a Managing Director, Head of Municipal Research at Conning, and lead author of Conning’s State of the States report in an interview with Opalesque. "The end result is a lower rainy day fund balance for cities at a time when we're concerned that the next recession may be just around the corner."
Conning does their credit assessment twice a year. The Octobe...................... To view our full article Click here
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