Moody's warns state credit rating may drop
BATON ROUGE - State Treasurer John Kennedy said Moody's Investors Service notified them that Louisiana's continuing budget problems could lead them to downgrade the state's credit rating from stable to negative.
Kennedy said such a rating would make investors less willing to loan the state money and raise interest costs. The treasurer blamed the Jindal administration's budget practices for creating a poor fiscal environment.
"Each year for the past seven years, we have spent more than we took in," Kennedy said. "We filled the hole with nonrecurring revenue, budget gimmicks and pretend 'efficiencies' that never materialized. We spent all $830 million in the Medicaid Trust Fund for the Elderly, drained the state employee health insurance trust fund and took money out of the tobacco settlement trust fund. There are consequences to being fiscally irresponsible."
The state is facing a $330 million drop in forecast revenues for this year as well as a predicted $1.6 billion budget shortfall next year. Kennedy also said Moody's noted current mid-year budget cuts, the state's dwindling rainy day fund, and the state's job growth in its report.
"As the U.S. economy picked up steam, Louisiana had muted job growth even before the oil price decline," Moody's analysts said in the report. "Payroll employment grew just 0.8 percent in the first half of 2014, compared with 1.4 percent in 2013."
Commissioner of Administration Kristy Nichols said the state is currently enjoying its highest credit rating in two decades, and they will do what's necessary to keep it.
Kennedy said lawmakers will need to address these issues immediately to prevent even more budget challenges that a negative rating would bring.
"This day has been coming for seven years. Moody's is telling us that we'd better get our fiscal house in order or we are going to be downgraded, which will cost taxpayers dearly in higher interest rates on our bonded indebtedness," he said.
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