Moody's says outlook for US local governments remains negative

WASHINGTON Feb 21 (Reuters) - Moody's Investors Service is keeping its outlook negative for U.S. local governments in 2013, as cities and counties must continue to operate with tight revenues, high demand for spending, and an "uneven economic recovery," the rating agency said on Thursday.

Those local governments with "elevated reliance on federal employment or funding that is subject to federal budget cuts" have an increased risk of rating downgrades as the U.S. Congress wrestles over the federal debt and deficit.

In a little more than a week, automatic spending reductions across most federal programs are set to take effect in a process called sequestration, and the military is warning it will have to furlough hundreds of civilian employees.