Friday, 13 February 2015 15:32
Jindal: S&P joins Moody’s with affirming rating, changing outlook to negative
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Jindal-smileTVMore good and very bad news for Louisiana governor Bobby Jindal and for the State of Louisiana. 

The good news: today, the S&P and Moody's affirmed Louisiana rating in general obligation bonds.

 

The bad:  Both also lowered Louisiana's outlook from stable to negative.

Also, earlier, in response to Moody's negative outlook, Louisiana Treasurer, John Kennedy, criticized the governor, evoking  punishing a child for being bad.

Below is a press statement from the Jindal administration regarding the S & P rating and outlook.

Note: The Jindal administration fails to mention the negative outlook ranking from Moody's and fails to comment upon the negative outlook.

The governor has been claiming that a $1.6B expected budget deficit for the period starting July 1 is "largely" due to the drop in oil prices.  However, facts show that the state has been expecting a $1.2B shortfall as of August 2014 before the recent drop of prices.  

Here is the statement from the Jindal administration after the S&P report.  Below that are the relevant comments from Moody's which explains the negative outlook it has issued:

FROM JINDAL ADMINISTRATION: 

Today, Standard & Poor's Ratings Services (S&P) affirmed Louisiana’s AA rating for $228.31 million in general obligation (GO) bonds. In addition to affirming the state’s rating, the agency changed Louisiana’s outlook from stable to negative. Earlier this week, Moody’s Investors Service and Fitch Ratings also affirmed the state’s overall bond rating. 

Commissioner of Administration Kristy Nichols said, “The fact that all three rating agencies have affirmed our ratings is great news for the state. In our discussions this week, we made it clear to each agency that we were focusing on creating sustainable reductions in the upcoming budget while reforming our tax credit structure to reduce the impact on higher education and healthcare. These ratings give us the opportunity to address their concerns during the upcoming Legislative session.

S&P attributes Louisiana’s AA rating to continued economic recovery, strong financial and budget management framework with a constitutional requirement that requires balanced budgets limiting budgeted expenditures to current revenue and available reserves, and strong legal framework for debt repayment and moderate debt and liability profile.  The change in outlook reflects recent revenue declines related to falling energy prices. 

Today’s overall rating remain unchanged since the last bond issuance and refunding in November.  High bond ratings allow the state to save millions by refunding previous bonds at lower interest rates. Since Governor Jindal took office in 2008, Louisiana has received eight credit rating upgrades among the three major credit-rating agencies. Louisiana's credit ratings are currently the strongest they have been in two decades.

FROM MOODY'S

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. 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.

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