The U.S. public finance sector is coming out of the fog of the pandemic and is mostly back to facing normal, pre-COVID stresses, according to a new Fitch analysis.

The note comments on the ratings outlook for numerous sectors, including utilities, higher education and others.


With a brighter outlook for the U.S. economy expected, Fitch Ratings is generally returning to the same standard analytical stresses for U.S. public finance that it was using prior to the onset of the coronavirus pandemic.

U.S. Tax-Supported Sector

As part of its standard rating process, the U.S. tax-supported sector utilizes a revenue stress from the Fitch Analytical Stress Tool (FAST) States & Locals model, which looks to each issuer’s own historical revenue cyclicality and then relates that to GDP as a scaling factor.

Most tax-supported issuers utilize a June fiscal-year end. For all issuers that (when evaluated) have audited fiscal year 2020 results available, and where there is visibility into the balance of calendar-year 2020 indicating a relatively benign revenue experience for the full year, Fitch will incorporate the same moderate cyclical stress used prior to the onset of the pandemic. The moderate scenario assumes a GDP sequence of -1.0%, +0.5% and +2%, for years one through three, respectively, and CPI of 2% each year. For any issuer where there is a lack of visibility into full 2020 calendar year revenue performance, or where a significant revenue decline is indicated, a downside stress will be utilized.