Fitch boosts La. bond rating again

Citing stronger financial management by the state in recent years, Fitch Ratings boosted its rating on $2.5 billion in outstanding Louisiana general obligation bonds from A-plus to AA-minus. A higher rating cuts interest costs for taxpayers. General obligation bonds are issued with a government’s pledge to repay them — and are not backed by specific flows of government money, as is the case with revenue bonds. Bond buyers use ratings to gauge risk. Fitch says its rating outlook for the Louisiana bonds remains stable. The AA-minus rating, according to Fitch, shows very high credit quality and a low default risk with repayment “not significantly vulnerable to foreseeable events.” The action marked the second consecutive year that Louisiana received a ratings upgrade from Fitch — and the first time state general obligation bonds have been rated by Fitch above the A category since the firm began rating the state in 1997. Fitch says Louisiana had acted to maintain a balanced budget and sizable reserves for the current and previous fiscal years. Fitch pointed to a balance of $768 million in the state’s rainy day fund for budget emergencies, saying it represents about 9.5% of current general fund tax, license and fee revenue. Fitch says state debt is moderate, although funding for two state pension systems — state employees and teachers — was below average. Fitch noted the state “has had some recent success with economic development efforts that support diversification.”