Moody's Credit-Rating Service Lowers Arizona's Outlook to "Negative," Worries About Expiration of New Sales Tax

Citing concerns over a sales-tax increase set to expire in mid-2013 and a budget that relies on the federal government to make changes caused Moody's to downgrade Arizona's outlook this week from "stable" to "negative."

Moody's affirmed Arizona's Aa3 credit rating, still considered "very low-risk." But the state budget's reliance on a waiver to cover the costs of some Medicaid patients and the scheduled end of the higher sales tax "reflects the uncertainty" of Arizona's financial affairs.

A downgraded credit rating, should it occur in the future, would mean the added burden of higher interest rates on top of everything else we have to worry about.

In May, voters approved the increase in state sales tax from 5.6 percent to 6.6 percent on most products, setting an end-date for the tax in May of 2013. A three-quarter majority in the State Legislature or another stamp of approval by voters would be needed to keep the tax rate that high.

Arizona will still be a year away from full economy recovery by mid-2013, experts say.

Also on Wednesday, Moody's downgraded the city of Glendale's credit rating, warning of potential legal challenges to the sale of bonds intended to retain the Phoenix Coyotes at the Jobing.com arena.