Louisiana’s credit took a new dip Wednesday, as a national rating agency downgraded the state because of its continued financial uncertainty, making it more expensive to borrow money for roadwork and construction projects.
The Associated Press reports Standard & Poor’s dropped Louisiana’s rating one notch—the third national rating agency to downgrade the state’s credit since February 2016—as Louisiana continues to struggle with financial gaps that have stretched over nine years. In its analysis, S&P also declared Louisiana’s financial outlook “negative.”
The rating agency cited weak tax collections, declines in the oil and gas industry and use of patchwork fixes to fill recent deficits. The agency notes that $1.5 billion in temporary taxes and other revenue passed by state lawmakers expires in mid-2018, creating further instability.
Gov. John Bel Edwards says the downgrade shows the need for “structural tax and budget reform” in the upcoming legislative session that begins in April.
The downgrade comes a week before Louisiana plans a general obligation bond sale to borrow $180 million for construction work. Credit agency ratings help determine interest rates on bonds, so the upcoming sale could become pricier.
“This is not totally unexpected, because the state’s budget and supporting revenues continue to be problematic,” Treasurer Ron Henson says in a statement. “The state still has a lot of work to do, and this downgrade is Wall Street’s recognition of Louisiana’s continuing problems.”
S&P dropped the state’s rating on general obligation bonds from AA to AA-minus and on appropriation bonds from AA- to A-plus. Read the full story.
