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Debt debate reverberates in state governments
Debt-limit debate creates uncertainty for state governments; some could pay more to borrow
By The Associated Press

ANNAPOLIS, Md. (AP) ' As President Barack Obama and congressional leaders struggle to reach a debt-limit deal, state governments are bracing for the impact of a threatened Aug. 2 federal government default on their economies and budgets.

This week, Moody's Investors Service warned that it probably will lower the credit rating on five states if it downgrades the U.S. government's credit rating.

While state officials said the actual cost of a downgrade won't break the bank, the higher borrowing costs would follow years of budget cuts. They also worry about federal employees potentially not getting paid, or the U.S. government not being able to make Medicaid payments.

The looming crisis will be high on the list of topics when dozens of mayors meet in Los Angeles on Friday at the U.S. Conference of Mayors.

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