While the $787 billion federal fiscal stimulus package signed into law on Tuesday, Feb. 17, provides a broad array of near-term benefits to municipal issuers, the relief it provides is not likely to create longer-term benefits, according to a new report from Moody's Investors Service.
Despite the fact that the American Recovery and Reinvestment Act of 2009 comprises substantially expanded funding and various tax benefits, most municipal issuers face credit challenges that may endure beyond the two-year scope of most of the bill's stimulus actions. The portion of the bill affecting the municipal market is approximately $222 billion.
With respect to the not-for-profit hospital sector, the report notes that urban hospitals serving large low-income populations and others funded by Medicaid will see some short-term relief of revenue pressures as a result of a temporary increase in the Federal Medical Assistance Percentage (FMAP). The not-for-profit hospital sector will remain under pressure, however, from rising numbers of the uninsured and cutbacks in employer-provided health insurance. Increased federal scrutiny of community benefit expenditures also remains a concern.
The report, "U.S. Federal Stimulus Likely to Relieve Short-term Credit Pressures Facing a Number of Municipal Issuers," is available at www.moodys.com.
