More than $40 billion of bonds sold by New York were stripped of their AAA status recently. Some $3.7 billion in debt issued by Chicago’s convention center operator vaulted out of junk. And more than $6 billion of Connecticut debt was slashed two notches.

Nothing about the governments has changed. The only difference was a new yardstick being used by S&P Global Ratings.

The rating company’s reevaluation of so-called priority lien debt -- which has a top claim on certain...