BATON ROUGE (AP) — Louisiana has escaped a feared credit rating downgrade from at least one of the national rating agencies.
Moody's Investors Service announced Thursday that it is keeping Louisiana at its same credit rating for an upcoming $74 million bond sale that will be used to finance work on Interstate 49 South in Broussard and Jeanerette.
The agency, however, left Louisiana on a negative credit outlook, despite requests from Gov. Bobby Jindal's administration to be upgraded to stable.
The status quo news was praised by the governor's top budget adviser, Commissioner of Administration Kristy Nichols, and state Treasurer John Kennedy, a frequent critic of the administration.
Kennedy said he was "very relieved." Nichols described the administration as "happy with the rating," even though it didn't get the upgrade to stable.
"We certainly felt it was appropriate to ask for the change in the outlook, and I think that you will see that change in the near future," she said.
Kennedy never expected the state to get an upgrade in this announcement.
"Our budget practices suck. Parts of our economy suck. Our governor's in Iowa (running for president). I didn't want to overreach. I was afraid they were going to give us a downgrade," he said.
Ratings from the credit agencies help determine interest rates when the state borrows money, through bond sales to investors. A drop in a state's credit rating raises interest costs, making it more expensive to borrow.
The rating agencies have raised concerns about Louisiana's long-term finances and patchwork budget maneuvers, which lawmakers reduced in the last legislative session. But the state still is using $550 million in piecemeal financing not expected to reappear annually to pay for continuing programs in the budget.
Moody's said Louisiana has a "structural budget imbalance and continued budgetary risks."
To explain the negative outlook, the credit agency cited the continued volatility of oil prices that affect Louisiana's tax collections, questions about the money that will be raised by tax changes recently made by state lawmakers and forecasts that already suggest a shortfall in the state's Medicaid program for this year.
Moody's also referenced possible changes to the state's "rainy day" fund on the ballot this fall that could steer dollars away from the fund and to transportation projects instead.
Kennedy said staying on negative credit watch suggests "the people who are running the state can't handle the money very well."
But he said the rating agency's decision signaled it has seen some improvement and will give the next governor, to be elected this fall and take office in January, time to make long-term changes to the state's budgeting practices.
Nichols took a different view, saying affirmation of the previous credit rating "reflects that we made concrete progress in structurally balancing the state's budget."
Louisiana also is waiting to hear from Standard & Poor's Rating Services about the credit rating for the I-49 bonds.
– by AP Reporter Melinda Deslatte
