The good news for the state is Moody's has assigned a "AA2 rating for its general obligation bonds.
However, the bad news for Louisiana is the agency has changed Louisiana's outlook from stable to negative.
The Moody's rating and outlook comes at a time when Jindal has been pursuing the nation's top spot--President of the United States.
In his statement, Jindal blames the oil drop and growing refundable tax credits the latter which have grown substantially under his administration and which has contributed to the $1.6 billion deficit outlook for next year's budget starting July 1, 2015. Jindal, to date, despite mounting budget problems in which the Louisiana legislature and the governor used one-time fixes and budget gimmicks, has refused to reduce or limit the credits because he viewed doing so to be a tax-- which reduction would tarnish his reputation in the republican primaries. This week, he and his administration has floated trial balloons for the first time mentioning the possibilities of reducing these expenditures.
The oil drop is a different issue. Jindal has been implying to the media that the deficit is largely due to the oil price drop. However, as this writer reported on Thursday, the Legislature determined a $1.2 billion 2016 budget shortfall in August 2014, before the onset of the steep oil price decline.
According to a knowledgeable source, oil only makes up less than $400 million of the current $1.6 billion shortfall.
Below is Jindal's statement.
Today, Moody’s Investors Service assigned an “Aa2” rating to $228.31 million in general obligation (GO) bonds. In addition to affirming the state’s credit rating, the agency changed Louisiana’s outlook from stable to negative.
Governor Bobby Jindal said, “We appreciate Moody's affirming the state’s credit rating, which has come as a result of acting quickly and responsibly when our state has faced revenue problems. In terms of the outlook change, the agencies have noted the variables the state faces because of falling oil prices and an increase in recurring expenditures due to growing refundable tax credits.
“Currently, there are hundreds of millions of dollars in expenditures being paid out through refundable tax credits. These are expenses coming out of the state's budget and going to entities that are above and beyond tax liability. We will work with the Legislature to address this issue head on. We believe this will help protect higher education and health care, while also improving our credit ratings even more.”
Moody’s attributes Louisiana’s Aa2 rating to timely responses to downward revenue projections; a trend of low unemployment relative to the nation; debt policies that have lowered the state's debt ratios over time; and below-average reserves for an energy-reliant state but adequate alternative liquidity.
Today’s overall rating remains unchanged since the last bond issuance and refunding, and means that the state is able 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.