State financial leaders Tuesday lobbied the big New York rating agencies, arguing that in light of the results of the recent legislative session, the influential firms should adjust the state’s credit score upwards from negative to stable.
How the agencies view Louisiana’s finances, now that the numbers are in from the changes made by the Legislature, will go a long way to determine how much the state will have to pay next month for borrowing that would raise money to expand Interstate 49 south of Lafayette.
It’ll be the first bond issued since legislators attempted to address some of the financial problems raised by Moody’s Investors Services in February, when the firm lowered the state’s credit outlook from stable to negative.
“We were very clear in our ask: We did the work that needed to be done,” Commissioner of Administration Kristy Nichols said Tuesday in between calls to Moody’s and Fitch Ratings. On Wednesday the team will make their presentation to Standard & Poor’s Financial Services.
“We asked for the negative to be upgraded to the stable outlook,” Nichols said. And she’d like an answer by Aug. 6.
“I’d love to get an upgrade, but I’m going to fight as hard as I can not to get a downgrade,” State Treasurer John N. Kennedy, who was also on the call, said in an interview. Staying at negative and not being further downgraded may be a more realistic outcome, he said.
Increasing the rating, generally, would save the state money, while a downgrade would make the borrowing more costly. Louisiana has an AA rating with Standard & Poor’s, which ranks the state in the bottom third of all 50 states.
On Aug. 10, the state wants to start the process toward an Aug. 18 sale of bonds that would raise $78.9 million for a section of I-49.
The project ultimately will upgrade about 160 miles of U.S. 90 from Lafayette south past Morgan City, Houma and the Bayou Lafourche communities to link to the Westbank Expressway in New Orleans. The work is being broken down into segments and expected to cost $3.1 billion.
The August bond money would go toward improving a railroad overpass, modifying frontage roads and upgrading intersections between Lafayette and Jeanerette, according to the presentation given to the rating services. The bonds would be repaid using the proceeds of unclaimed property, which are abandoned deposits, gift cards not cashed in, and the like.
The financial analysts asked few questions and gave little indication of whether the Louisiana team was successful.
“All discussions with our issuers are confidential” David Jacobson, of Moody’s Investors Service, wrote Tuesday in an email.
The importance of the three agencies’ opinions was underscored by calls Gov. Bobby Jindal made a few days after the Louisiana Legislature adjourned on June 11.
Since Jindal chatted with the credit agencies, a multi billion-dollar settlement was announced with British oil giant BP over the Deepwater Horizon incident, and the governor vetoed legislation that would have given about 130,000 retired state employees a cost of living adjustment of about $30 per month. (The rating agencies had asked questions about House Bill 42, as part of their critique on the state’s pension costs.)
Also, since the governor’s call, fiscal officers have been able to calculate the projected revenues and expenses from all the measures passed into law last month.
Nichols, Kennedy and a half dozen other financial officials, including Revenue Secretary Tim Barfield and Health Secretary Kathy Kliebert, participated in the calls Tuesday.
The team focused on how legislators increased revenues by $663 million this fiscal year, $643 million next; reduced the use of one-time money (funds not available next year) from $1 billion to $542 million; decreased the amount of expenditures that have to be paid year in and year out by $464 million. Legislators also increased funding for higher education and health care.
Kennedy said the legislators had to concentrate of raising enough short-term cash to pay the bills this year, though they made some structural changes. He underscored that it took a few years to get the state’s finances into the condition they were in, and it’ll take a few years to get them out.
“We had all four wheels in the ditch,” he said. “Now we got one wheel out.”
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