Fitch has become the latest ratings agency to downgrade Louisiana’s credit rating.
In reassigning the state a AA- rating for more than $3.7 billion in general obligation bond debt on Tuesday, Fitch cited “persistently imbalanced financial operations and the state’s reliance on one-time measures for immediate gap-closing, which, along with overly optimistic revenue projections, have resulted in the need for successive years of midyear budget corrections.”
The lower rating means the state likely will have to pay higher interest rates when borrowing money.
The latest downgrade comes just days before Louisiana is set to sell $600 million in general obligation bonds, which Fitch also put at AA- rating.
State legislators met in a 25-day special session earlier this year. Despite approving several tax hikes, the state still faces about a $750 million gap in the budget that begins July 1. Gov. John Bel Edwards, who took office Jan. 11, has said he plans to call a second special session later this year to address that shortfall.
In response to the Fitch news Tuesday, Edwards largely laid blame on his predecessor Bobby Jindal’s administration and lawmakers who didn’t approve further revenue-generating measures in the special session.
“We had hoped the special legislative session would have produced the results we needed to avoid another credit downgrade,” Edwards said in a statement. “Unfortunately, some members of the Legislature refused to work with me to stabilize our budget. We will continue working to address the budget challenges before us, and I am hopeful that during the next special session, the Legislature will come together in the spirit of cooperation to restore prosperity to our state.”
Moody’s Investors Service downgraded Louisiana’s credit rating earlier this year, citing the state’s dismal budget outlook.
“This is what happens when you spend more than you take in for seven years running. It’s disappointing but not surprising,” state Treasurer John Kennedy said in a statement. “The rating agencies are tired of Louisiana’s accounting gimmicks and spending practices.”