Louisiana Moves To 'Stable' Credit Outlook By Rating Agency


BATON ROUGE, La. (AP) — A national credit rating agency said Monday that Louisiana has moved to more solid financial footing after passage of a seven-year sales tax renewal aimed at ending repeated cycles of budget gaps.

Moody's Investors Service didn't upgrade Louisiana's credit rating, a decision that would make it cheaper to finance roadwork and construction projects. But the rating agency boosted its outlook for Louisiana from "negative" to "stable," an indication the state won't be downgraded as some officials previously feared.

Moody's cited the "recent stabilization of the state's economic base" after a decade of short-term, patchwork budget fixes. In the last special session, Gov. John Bel Edwards and lawmakers renewed 0.45 percent of an expiring 1 percent state sales tax to avert deep cuts, until mid-2025.

The enactment of a seven-year tax was a surprising stretch of time for a state that regularly used temporary fixes to balance its budget, particularly under the eight-year tenure of former Gov. Bobby Jindal. Wall Street credit rating agencies have repeatedly raised concerns about Louisiana's use of piecemeal, impermanent solutions for long-term budget imbalances.

The three major rating agencies — S&P Global Ratings, Moody's Investors Service and Fitch Ratings — all downgraded Louisiana's credit rating in 2016 and 2017, making it more expensive to borrow money.

Though Moody's adjustment Monday was small, Edwards touted the action, saying it validates his calls for budget stability.

"Thanks to the bipartisan compromise achieved during the last special session, Louisiana is no longer on the negative watch list," the Democratic governor said in a statement. "By working together, for the first time in a long time, Louisiana's budget will have the kind of stability and predictability we need to bring new business opportunities to our state and grow our economy."

Moody's said Louisiana's credit rating remains below the median rating of states. The agency pointed to volatility in the oil and gas industry, the lessening of Louisiana's reserves after years of draining savings accounts to balance the budget and the "difficulty the state has had crafting solutions to large structural budget gaps."

Edwards said he hopes the state will "merit a bond upgrade as our overall fiscal situation and economy continue to improve."

Treasurer John Schroder, a Republican, called the Moody's announcement good news, but he said Louisiana needs to make improvements in its spending practices to help reach a rating upgrade.

"It's time to get to work on the spending side of the problem," Schroder said in a statement. "Extending temporary taxes for the next seven years with no real structural reforms doesn't sit well with me."

– by Melinda Deslatte, AP reporter

Categories: Finance, Politics, Today’s Business News