Louisiana lawmakers struck a budget deal that spared health care and colleges from deep cuts, lessened the reliance on quick fixes to stay afloat and won Gov. Bobby Jindal’s signature. But was that enough to satisfy national credit rating agencies?
According to an analysis by The Associated Press, state officials are waiting to have that question answered, knowing the recent legislative session began with the threat of a credit downgrade hovering over Louisiana because of worries about its shaky finances and patchwork budget maneuvers.
The answer from the rating agencies is of particular interest to Jindal, who’s running for the Republican presidential nomination and is touting his management of Louisiana as one of his selling points. A credit downgrade would undermine the narrative.
News of whether Louisiana made enough progress to escape a lowering of its credit rating should come by late July or early August, as the state readies for its next round of borrowing through a bond sale to investors. Ratings from the credit agencies help determine interest rates. A drop in a state’s credit rating raises interest costs, making it more expensive to borrow money. In February, two national rating agencies — Moody’s Investors Service and Standard & Poor’s Rating Services — moved the state from a “stable” to “negative” credit outlook even after state officials sought to reassure them about Louisiana’s financial condition. At the time, Standard & Poor’s credit analyst Sussan Corson wrote that whether the state focuses on “structural solutions” to its budget problems “will be a key determinant of its future credit stability in the next two years.”
