Fitch downgraded Louisiana’s credit rating today, citing persistent fiscal troubles that have been compounded by the global drop in oil prices.
Reuters reports Louisiana’s general obligation debt was downgraded to AA- from AA. Both ratings are investment grade. In February, Moody’s Investors Service downgraded the state to Aa3.
Gov. John Bel Edwards, via a statement issued from his office, says the downgrade further illustrates the budget crisis left by the Jindal administration.
“We had hoped the special legislative session would have produced the results we needed to avoid another credit downgrade. Unfortunately, some members of the Legislature refused to work with me to stabilize our budget,” Edwards says. “We will continue working to address the budget challenges before us, and I am hopeful that during the next special session the Legislature will come together in the spirit of cooperation to restore prosperity to our state.”
Fitch’s ratings downgrade affects $430 million in general obligation refunding bonds and $65.14 million in taxable general obligation refunding bonds that are expected to sell on or about April 20, according to a news release. It also impacts an estimated $3 billion in outstanding general obligation bonds and approximately $732 million in outstanding Louisiana appropriation-backed bonds.
Fitch reports that Louisiana has relied on “one-time measures for immediate gap-closing, which along with overly optimistic revenue projections,” has left the state in need of “successive years of mid-year budget corrections.”
Earlier this year, the Louisiana Legislature worked to close a $940 million gap in this fiscal year’s budget ending in June. Fitch noted that many of the state’s fixes to fill this year’s gap end in “fiscal 2018 and almost half of the solutions are one-time in nature.”
The state must also still fix a $750 million budget gap in next year’s budget, starting in July, which is down from $2 billion identified earlier this year.
Edwards, who took office in January, has proposed reducing robust corporate incentives, but he has faced resistance from Republican legislators and business groups.
In a statement, State Treasurer John Kennedy notes that the latest downgrade comes just days before Louisiana goes to the market with up to $600 million in general obligation bonds.
“This is what happens when you spend more than you take in for seven years running. It’s disappointing but not surprising,” Kennedy says. “The rating agencies are tired of Louisiana’s accounting gimmicks and spending practices.”
Earlier today, Kennedy criticized Edwards’ tax proposals adopted during the legislative session to close the state’s budget gap.
