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Aug 8, 2011 11:23 PM by Shawn Kline

S&P downgrade may cause trickle-down to local govt.

As the federal government continues to slip, Louisiana holds onto its top credit rating- at least for now.
The downgrade could force more federal cut backs and that means less money for some state programs.

One scenario shows road projects coming to a stop, medicaid funds running low and schools cutting back on days to save a few bucks.
Not a promising future but Louisiana Treasurer John Kennedy says it's what Congress needs to do.

"It could mean less money for the state of Louisiana given that half of our budget is based on federal dollars," Kennedy said of the S&P downgrade.

He's citing half of a budget that is already over budget.
Kennedy says the possibility of losing some of those funds can't be ignored.

"If we get less federal money in the future, we need to make changes in those programs." Kennedy says, "that's something we need to start planning for today."

"Everyone seems to think it's a Washington DC problem." St. Landry Parish President Don Menard says it starts at home, "it's a Cankton problem, a Carencro problem, it's a Scott problem."

Menard says when federal cuts come, local governments are going to be the ones struggling.

"Where the rubber meets the road is local government." He says, "it means a lot of projects won't be funded and programs may be cut."

Then there's federal bonds: Millions of dollars borrowed from the federal government. If interest rates go up, the bill ends up on the door of the taxpayer.

"We'll be able to deal with it, we'll be able to manage it," Kennedy said. "We just need to start preparing for it."

Tax experts point out when other countries' ratings dropped, bond rates didn't change much.
However, this is all uncharted water in the US.



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