"The downgrade of U.S. federal debt could result in de facto credit downgrades of some state-level…debt, which has been priced and rated as if the federal government were the backer of last resort," Jason Schenker, president of Prestige Economics LLC, wrote in a note to clients Saturday.
Mr. Schenker said the cost of refinancing debt is likely to become more expensive, which "could result in a further bleeding of state and local government jobs."...
The downgrade poses another risk. "It's an extreme concern to any state if their ratings were to decline in any way," Scott Pattison, executive director for the National Association of State Budget Officers said in a interview before S&P made its decision public. "That could have significant impacts," such as higher borrowing costs over the long term, he said.
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