Louisiana has been spared a credit rating downgrade. National rating agency Moody’s Investors Service announced today it was keeping Louisiana at its current credit rating but moving the state from a stable to “negative” credit outlook.
The decision comes a day after Gov. Bobby Jindal made a personal pitch to the rating agency about the health of Louisiana’s economy and finances. Other state officials also spoke with Moody’s, saying the state was working to correct ongoing budget problems.
In a prepared statement, Jindal says he appreciates Moody’s decision, adding that it comes “as a result of acting quickly and responsibly when our state has faced revenue problems.”
“In terms of the outlook change, the agencies have noted the variables the state faces because of falling oil prices and an increase in recurring expenditures due to growing refundable tax credits,” Jindal says in the release. “Currently, there are hundreds of millions of dollars in expenditures being paid out through refundable tax credits. These are expenses coming out of the state’s budget and going to entities that are above and beyond tax liability. We will work with the Legislature to address this issue head on. We believe this will help protect higher education and health care, while also improving our credit ratings even more.”
A rating downgrade would have made it more expensive to borrow money and would have been seen as a negative commentary on Jindal’s management of state finances. Moody’s has raised concerns about short-term patches Jindal and lawmakers use to balance the budget, maneuvers that have created annual shortfalls.
Treasurer John Kennedy issued his own press release this afternoon following Jindal’s release, in which Kennedy equates the change in the state’s credit outlook to “probation.”
“Like a kid behaving badly, we’ve been placed on probation,” Kennedy says. “This should be a wake-up call that we need to stop spending more than we take in.”
