00:00Amanda, which states are in better shape than the federal government?
00:05I would say quite quite a few of them.
00:07About a dozen states actually have triple A credit ratings from all three ratings companies.
00:13When it comes to Moody's, over a dozen have triple A credit ratings from from Moody's.
00:20And so we're seeing states like Florida, Georgia, North Carolina really kind of be very good examples of fiscal stewardship.
00:30That the U.S. could probably learn something from, which is something that the governors themselves have have made that point.
00:35Yeah, I'm sure they're patting themselves on the back there as they tout their achievements.
00:39Why is that? Why are some of these states and you can see the ones that do have triple A ratings highlighted in yellow there?
00:47Why are they in better shape?
00:49It's really by design. So a lot of states in their constitution or in their state laws, they have most states actually have provisions where they have to pass a balanced budget.
00:59And so we know that obviously that's not the case for the U.S. government.
01:03Really, by design, states have these measures to make sure that if their finances are not looking good, they make cuts.
01:10And so we see that almost every year, a certain number of states making cuts to make sure that they can balance their budget.
01:16So it's very much embedded in in their governance.
01:22That makes a lot of sense. You know, when we look at the downgrade by Moody's at the end of last week, so many people kind of shrugged their shoulders and said, yeah, this was expected.
01:31The other two ratings companies already did this. So it's not that big of a deal.
01:35Nevertheless, there is a ripple effect. For instance, Moody's lowered the outlook on its rating of the Smithsonian Institution.
01:40Talk us through some of those examples of a ripple effect.
01:46The Smithsonian is a great example because they get just over 50 percent of their revenue from federal appropriation.
01:52So they're a really strong example of the kind of it is marginal.
01:57We haven't seen a ton of downgrades.
01:59We're not expecting the states that are rated AAA to lose their credit ratings.
02:04But there is an impact. I do think investors, you know, they like to say that they do their own credit work, so they don't pay as much attention to credit ratings.
02:13But I think this is important. And I think that what we're seeing in the bond market this week really kind of underscores that point.
02:19And of course, munis tend to follow what the Treasury market does.
02:22So muni investors do still really care about this topic.
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