One of the influential financial rating agencies Wednesday affirmed the state’s credit rating — neither dropping it nor increasing it — in advance of a $73.7 million sale of bonds to fund segments of the Interstate 49 south of Lafayette.
Moody’s Investors Services maintained Louisiana’s credit rating and gave the upcoming bond a favorable Aa3 rating.
Commissioner of Administration Kristy Nichols said in a prepared statement that the decision reflects “concrete progress in structurally balancing the state’s budget. I’m confident that the outlook will improve in the future as the ratings agencies see that we have been responsive in addressing their concerns.”
How the credit agencies rate the state’s finances goes a long way in determining how much interest taxpayers will have to pay to get investors to buy the bonds. The lower the rating, the higher the interest.
“Moody’s could have downgraded us, but they didn’t. They have left us on negative credit watch, and Moody’s is giving new leadership time to fix our problems,” state Treasurer John N. Kennedy said in a prepared statement.
The upcoming bond sale will be used to match federal funds and finance construction on U.S. 90 from Albertson Parkway to just north of Ambassador Caffery and the U.S. 90-La. 318 interchange project. The projects are part of a multiyear effort to convert 160 miles of the U.S. 90 corridor from Lafayette to New Orleans into Interstate 49.
The bonds would be repaid using the money left over from unclaimed property proceeds.
“There is no denying that Louisiana has serious budget issues,” Kennedy said.
The big three credit rating agencies have expressed concerns about the state’s budget practices, particularly the use of “one-time” money — such as settlements and property sales — to pay operating expenses that recur year in and year out.
About $1 billion of the $1.6 billion deficit going into the fiscal year that began July 1 came from the use of “one-time” money. Through a series of rollbacks of tax breaks and an increase in the tax on cigarettes, among other moves, state government was able to close the budget gap without making deeper cuts in state services. Lawmakers will still have to find $550 million next fiscal year to make up the “one-time” money used in this year’s budget.
Moody’s said that the “bonds carry the negative outlook,” which reflects the state’s structural budget imbalance and risks, such as oil prices that continue to drop. Moody’s also noted the state’s difficulties in containing the costs of Medicaid and changes voters are being asked to make to the state’s rainy day fund.
On the upside, Moody’s noted the situation is helped by the funds from BP settling the lawsuits over damage caused by the Deepwater Horizon incident.
Follow Mark Ballard on Twitter @MarkBallardCNB. For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/.