Friday, 13 February 2015 15:06
Treasurer Kennedy spanks Jindal for Moody’s negative outlook for Louisiana
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Louisiana Treasurer John Kennedy invoking a misbehaving child, figuratively spanked Presidential hopeful, Louisiana Governor Bobby Jindal, for Moody’s credit outlook decline from stable to negative issued today.
Governor Bobby Jindal has been claiming that the massive $1.6B budget debt for 2016 is largely due to the decline in oil prices.

Today, in a press statement, Jindal also included the lower Moody's outlook on tax credits which the state has been issuing.  

However, facts show that the state knew it had a $1.2B shortfall as early as August 2014, long before the dramatic drop in prices.
Kennedy cited the report which said “a $1.6 billion structural deficit, continued budget gaps, the state's large Medicaid caseload, job growth below the national average and significant unfunded pension liabilities. "The negative outlook reflects the state's growing structural budget imbalance, projected at $1.6 billion for fiscal 2016, or about 18% of the $8.7 billion general fund even after significant budget cuts of recent years:.

Here are the comments from Kennedy after the Moody's Investors Service changed Louisiana's credit outlook from stable to negative:
"Like a kid behaving badly, we've been placed on probation. This should be a wake-up call that we need to stop spending more than we take in," said Treasurer Kennedy. "We've drained our trust funds, we've relied on nonrecurring money and we've had to cut the budget in the middle of the fiscal year for too many years now. Many have been warning that this day would arrive, and it has."
The action by Moody's impacts $2.7 billion in outstanding general obligation debt and $1.25 billion in related debt. Moody's warned that continued structural imbalances, steep growth in pension costs, deterioration in financial liquidity and failure to contain costs in the state's Medicaid system will result in a credit rating downgrade, making it more costly for the state to borrow money.

According to the Moody's report, the outlook reflects a $1.6 billion structural deficit, continued budget gaps, the state's large Medicaid caseload, job growth below the national average and significant unfunded pension liabilities. "The negative outlook reflects the state's growing structural budget imbalance, projected at $1.6 billion for fiscal 2016, or about 18% of the $8.7 billion general fund even after significant budget cuts of recent years," Moody's said. "The state has options for reducing the imbalance, including scaling back various tax credit programs, but the overall scale of balancing measures needed may further deplete resources and reduce the state's liquidity, which has been one of its strengths."

Moody's advised the state to align recurring expenditures with recurring revenues, establish more robust reserves, diversify the economy and get a handle on Medicaid and pension costs.


"Moody's is giving us the playbook we need to follow. This is not rocket science; it's fiscal conservatism," said Treasurer Kennedy. "The administration is out of smoke and mirrors. We need to get to work before our taxpayers pay for the administration's mistakes with higher interest rates."

Read: Should Jindal blame oil price falls for Louisiana's $1.6B budget crises?

 

                                                                                                                                

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