A national credit rating agency says Louisiana has a “structural deficit” in its budget that has been worsened by falling oil prices. Moody’s Investors Service, which tracks state financial affairs and issues credit ratings that determine interest rates, published a credit outlook update today on Louisiana.
Moody’s looked at Louisiana’s $1.6 billion budget shortfall for the fiscal year that begins July 1. Most of the shortfall is tied to the use of patchwork funds in the budget that are slated to disappear. The problem has been deepened by the oil price drop, Moody’s notes.
“Because Louisiana has a structural deficit, significant downward adjustments to revenues will make balancing the 2016 budget especially challenging,” Moody’s says in the update. “Although the state has closed significant gaps in the past, its actions in recent years have diminished reserves and budgetary flexibility.”
In a press release, Treasurer John Kennedy calls the write-up a “warning shot” that the rating agency is closely following state budget troubles to determine if its credit rating should be downgraded.
“Each year for the past seven years, we have spent more than we took in,” Kennedy says. “We filled the hole with nonrecurring revenue, budget gimmicks and pretend ‘efficiencies’ that never materialized.” See the complete Moody’s update.
