Credit rating agency Moody鈥檚 has cut its credit rating for the D.C. government from its top Aaa rating to Aa1 and revised its outlook to “negative,” citing the effects of federal government job and spending cuts on the District’s economy.
D.C. first earned Moody鈥檚 top credit rating in 2018. Moody鈥檚 put the District鈥檚 status on watch in March, as did Fitch Ratings and S&P Global Ratings.
鈥淭he negative outlook reflects the increased likelihood of further federal spending and workforce cuts and the District鈥檚 declining commercial real estate market, as well as the high degree of uncertainty regarding federal government policy changes,鈥� Moody鈥檚 said.
The downgrade by one notch will increase borrowing costs for D.C.
The District could lose as many as 40,000 federal government jobs, or 21% of the federal government workforce, which Moody鈥檚 said will erode the stability that D.C. has always enjoyed from the federal government鈥檚 presence.
D.C. Chief Financial Officer Glen Lee issued a statement after the Moody鈥檚 downgrade, saying it is not the result of degradation of the District鈥檚 strong governance and fiscal management practices.
鈥淩ather, it stems from broader federal decisions regarding its workforce and spending, and economic trends that are beyond the District鈥檚 control and are having a disproportionate impact on the local economy,鈥� Lee鈥檚 statement said.
D.C. is already grappling with its own financial setback as it searches for ways to cut its budget by $400 million brought on by Congressional cuts. The Senate has approved restoring the city鈥檚 fiscal year budget, but the House has so far not acted.
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