The outlook for U.S. local governments remains negative, as the sector continues to struggle with revenue constraints and expenditure demands amid a slow and uneven economic recovery, Moody’s Investors Service said in a report released Thursday.

“Our sector outlook speaks to the challenging environment in which most U.S. local governments will likely operate over the next year,” said Rachael Cortez, a vice president and senior analyst, and the main author of the report. “Overall, the economic recovery remains sluggish despite some bright spots, and looming federal spending cuts may exacerbate weak growth rates.”

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