Moody's Downgrades D.C. Credit Rating to Aa1 Amid Federal Job Cuts

Moody’s has downgraded the District of Columbia’s credit rating from Aaa to Aa1 and revised its outlook to negative, citing significant federal workforce cuts, reduced government spending, and a weak commercial real estate market as primary factors. The downgrade is expected to increase borrowing costs for the city and comes as D.C. faces the potential loss of up to 40,000 federal jobs, which would erode the local economy’s stability given the city’s historic reliance on the federal government. City officials, including Chief Financial Officer Glen Lee, emphasized that the rating change does not reflect poor local fiscal management but rather broader federal decisions and economic trends beyond D.C.’s control. The downgrade occurs as the city seeks to address a $400 million budget shortfall and considers major capital projects, such as upgrades to Capital One Arena and a new stadium for the Washington Commanders. Moody’s also warned that economic growth in D.C. will likely lag behind the rest of the region and country due to these outsized impacts. Political debate continues over the causes, with local officials blaming federal policy shifts and some national figures attributing the downgrade to local governance issues.