The Commonwealth may not have a debt problem after this week's budget, but now the states do.

The Federal Government received plaudits from all three major ratings agencies for its moves to reduce welfare payments and other government spending.

Fitch says Australia is now not only AAA-rated by all three major agencies, but also looks better than almost any of its top rated peers.

"The 2014-2015 Australian Commonwealth budget reinforces the strong public finances and a credible policy framework, confirming the country is well-positioned relative to other AAA-rated sovereigns," the agency noted in a press release.

"It is positive for Australia's long-term sovereign risk profile that the planned fiscal consolidation will be driven primarily by structural reforms to spending."

However, one of the key spending cuts - backing out of agreements struck between the previous Labor government and the states to boost hospital and school funding - is likely to be a ratings negative for Australia's state governments.

As the federal budget currently stands, the states are going to have to find an extra $80 billion over 10 years to fund healthcare and school education, or cut back on their services.

While the Commonwealth funding cuts will not start to hit until 2017, Queensland premier Campbell Newman says states will need to start planning for them now.

"We have to be scrutinised by the ratings agencies and they're quite rightly going to be asking, 'what happens in three years time?'" he said.

"And they will ask that question of Tim Nicholls and Campbell Newman, and indeed my team, not in three years time, they'll be asking that question over coming weeks and months - and they will want an answer."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 3 minutes 15 seconds 3 m 15 s Standard and Poor's says federal budget cuts may have state ratings impact ( Michael Janda ) Download 1.5 MB

So what answer will the ratings agencies want?

The ABC asked Standard and Poor's analyst Anna Hughes, who rates the credit risk of Australia's state governments.

"It would definitely put pressure on the states' budget position, they would need to have a look at service delivery, and what services that they continue to provide to constituents within their state," she said.

While state governments could also consider raising their own taxes, Ms Hughes says they do not have many attractive options that could raise the required revenue.

"They don't have as many levers to pull as the Federal Government does have, given that they actually get 50 per cent of their revenues from the Commonwealth through the GST and specific purpose payments," she added.

However, an agreement between the states and Commonwealth to increase the GST would be looked upon favourably by ratings agencies.

"It's a lot less volatile than some of the transaction taxes that the states themselves rely upon, so there's definitely some fiscal reasons for increasing the GST," Ms Hughes explained.

More debt would threaten ratings

One option that would not be looked upon favourably is extra borrowing by the states in order to fund their day-to-day services.

"If a state government was actually needing to fund its operating position by increasing debt then that would put significant pressure on the credit rating," the S&P analyst warned.

Perhaps ironically, Ms Hughes says it is the states with the best credit ratings that have the most to lose, with New South Wales already on a knife edge clinging to its cherished AAA debt rating.

"Western Australia, Queensland and Tasmania are AA+ at the moment, and there's a lot more room to move within a AA+ rating than there is within a AAA," she said.

"With the AAA states, New South Wales is on a negative outlook and has some significant infrastructure issues that it's working through.

"While Victoria is in a better position, it still has a fine balance that they need to maintain as well."

However, the states are likely to hang onto their prized ratings, which make borrowing cheaper, for at least a while longer.

Not only do the Federal Government's health and education funding cuts take another three years to start kicking in, the state premiers - mostly Liberal - are kicking down the doors in Canberra to have the cuts reversed.

Anna Hughes says it is quite possible they will be successful in rolling back some of the proposed cuts.

"I think the state governments will obviously push back on some of those cuts, so what the final form is like will be difficult to tell," she added.

With Victoria, New South Wales and Queensland all going to the polls within the next year, the Liberal premiers from the biggest states will be pushing back particularly hard.