Moody’s rating announced this week that it is downgradening DC’s credit rating amid a wave of massive federal workforce cuts and hits on the local economy.
Moody said New Report Downgrading the district’s issuer rating from AAA to AA1 is a blow to cities where local governments are likely to make it more expensive to borrow money and spend more taxpayers.
The downgrade comes from “increasing the negative pressure that puts federal spending, labor and real estate on the district’s economy and finances.”
Analysis shows that DC is expected to lose 40,000 workers over the next four years as the Trump administration’s government efficiency (DOGE) is being reduced to the federal workforce. Moody’s said the loss of the workforce “erodes stability” that the federal government has historically had more to do than the city and its economy.
DC Chief Financial Officer Glenley said in a statement The change in ratings is not a result of degradation in Washington’s governance.
“In fact, it is attributed to economic trends that go beyond broader federal decisions on its workforce and expenditures, and have disproportionate impacts on the local economy,” Lee’s statement said.
That’s how the evaluation changed First reported By the Washington Post.
Moody’s said in the report that it was likely that federal spending and federal workforce cuts would likely increase, and that the city was declining to the commercial real estate market, giving DC a negative outlook. The rating remains at AA1 now, but it’s still a strong rating given the Moodys can descend to C.
Still, analysts pointed out that DC has several strengths. The city benefits from a highly educated workforce and above average income levels, and has “experimental financial governance.”
Moody’s said it is unlikely to upgrade Washington’s valuation in the next 12-18 months, but if the district can absorb loose federal workers into the private sector without a decline in urban reserves, it could be fixed steady rather than negative.
DC achieved the highest possible status in 2018, the triple-A rating, after recovering from financial problems in the 1990s.
