NEW YORK--()--While the fiscal cliff has been temporarily averted, uncertainty about a possible federal deficit reduction plan creates a lack of clarity for public finance, according to a new Fitch Ratings report.
The majority of U.S. public finance sector outlooks for 2013 are stable. Fitch anticipates that the majority of rating actions in 2013 will be affirmations.
'The last minute resolution of the fiscal cliff lessens concerns about the U.S. economy falling into recession and removes the economic risk of a large-scale federal personal income tax increase. But fiscal, economic and regulatory uncertainties continue to be an immediate threat to the 2013 public finance outlooks,' said Rich Raphael, Managing Director, U.S. Public Finance Group.
'If the automatic spending cuts now scheduled for March 1 take effect, Fitch does not expect a near-term impact on ratings. However, a significant multi-year federal deficit reduction plan poses a more formidable risk to the economies and budgets of states, particularly if cuts to large spending programs like Medicaid are included. Local governments could bear the brunt of federal cuts to states if the states reduce aid to the locals.'
Hospitals will be challenged by the potential cuts, since Medicare is a key target for spending reductions. Medicare cuts, coupled with reduced reimbursement expected from healthcare reform, will likely threaten operating performance.
For more information, a special report titled '2013 US Public Finance Outlooks' is available on the Fitch Ratings web site at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2013 U.S. Public Finance Outlooks