SAN FRANCISCO - Nevada received a second negative outlook yesterday, as Moody's Investors Service reaffirmed its Aa1 rating on the economically battered state's limited-tax general obligation bonds.

Fitch Ratingsrevised the outlook on its AA-plus rating to negative in March. The negative outlook applies to both the $297 million of GOs this week and $1.9 billion of outstanding tax supported debt.

Standard & Poor's yesterday affirmed the state's rating at AA-plus with a stable outlook.

"The housing market crash and high oil prices have all taken their toll on the state economy," Moody's analyst Emily Raimes wrote. The rating report described "severe revenue, economic and budgetary stress" and declining reserves in a state that's traditionally been one of the fastest growing and most resilient in the nation.

The U.S. housing downturn has hit the state harder than most, just as the housing boom benefited it more than most, Raimes said.

Nevada has the nation's highest home foreclosure rate, and new home sales have dropped by half in the past year. That's cut into the state budget, reducing projected property transfer tax revenue by an estimated 30% in the just-completed fiscal year. Property transfer taxes, which make up just 3% of state revenue, are forecast to decline 34% in the current fiscal year.

The budget has also suffered declines in gambling revenues and sales taxes, which are major revenue streams that together provide a third of Nevada's income. Sales taxes are expected to have fallen 3.6% in fiscal 2008, while gaming revenues are also expected to have dropped 4.3%. In May, gaming tax collections were down 22% from a year earlier.

Gaming revenues have been "relatively resilient" in previous downturns, Raimes said. But the current economic slump is hitting the state's "highly concentrated economy" particularly hard, as high gasoline taxes dissuade Californians from making trips to Nevada casinos and falling home values weigh on consumer spending by locals.

The state in June forecast a $1.2 billion revenue shortfall for the current budget biennium. General fund revenues are about $3.2 billion each fiscal year.

Both Moody's and Fitch said the state has reacted quickly to the downturn. The state has cut spending by $914 million for the two-year budget cycle and decided to draw down its entire $267 million rainy-day fund.

While praising its quick reaction, Moody's warned that many of budget balancing moves were one-time measures that will make the next budget biennium harder.

"The actions that the state has taken to date have left it with limited remaining budgetary flexibility," Raimes wrote.

On the other hand, she also said the state benefits from "low" levels of debt. As a percentage of personal income, the state's 2% debt burden is less than the 2.6% U.S. median and just the 30th highest in the nation.

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