At least one entry in the “Boring But Important” category has to be the Herculean effort the Jindal administration has put into keeping the influential New York credit rating agencies from downgrading Louisiana’s finances.
Complex analysis of high finance doesn’t get a lot of clicks, but how Moody’s Investors Services, Fitch Ratings and Standard & Poor’s Financial Services — the Big Three — rank Louisiana is of utmost importance, not only to taxpayers but to Gov. Bobby Jindal’s political ambitions.
State government borrows millions — in the form of bonds sold to investors that are repaid by taxpayers — to pay for expensive projects like highway expansions and building construction. How much taxpayers have to repay is based, in large part, on the credit rating the Big Three give.
Think of that television commercial in which the wife of the cute couple applying for a mortgage to buy a home plants her feet on the banker’s desk and demands “What else can you do for me?”
Louisiana is more like the sketchy couple with a portfolio of faddish investment schemes and history of hand-to-mouth financing for daily expenses. This couple is just happy to get the loan, at whatever price.
For politicians, the Big Three rating is the report card on how well they’ve handled the public’s money.
In the race for the GOP presidential nomination, hands-on experience managing taxpayer dollars is what separates governors — 10 of them, past and present — from the eight or so doctors, executives and reality-show hosts.
Louisiana legislators went into session with two of the Big Three warning investors that state government was on the precipice because of gimmicky accounting, irregular financing practices and an over-reliance on money from oil and gas. The “negative watch” is a warning that a downgrade is imminent.
A few days after the session ended on June 11, Jindal was on the phone telling the New York analysts that this year’s state budget had less piecemeal funding, fewer expenses and more revenue.
The numbers are now in, so last week, Team Jindal — and some legislative staff and financial officials who are not big fans of the governor but also were on the conference call because of their positions — put the full-court press on the Big Three.
“We met the challenge head-on and dramatically improved our overall structural imbalance,” Commissioner of Administration Kristy Nichols said Tuesday after one of the calls. “We asked for the ‘negative’ to be upgraded to the ‘stable’ outlook.”
And she wants an answer by Aug. 6.
(It would be interesting to see how the analysts reacted to the hard sell. Notoriously poker-faced, the analysts asked few questions and gave away no tells.)
Jindal added his two-bits on the campaign trail and on national television, telling interviewers how the credit rating has gone up eight times on his watch.
In a 774-word response to a 630-word column by Al Hunt, of Bloomberg Media, Jindal’s campaign noted, in bold print: “Louisiana’s credit rating has improved drastically since 2008, with the state receiving eight credit rating upgrades among the three major credit-rating agencies over the past six years.”
What does that actually mean?
A few days after Hurricane Katrina hit in August 2005, while people were still being rescued from the roofs of their houses, the analysts lowered the state’s credit rating.
Then, billions of dollars flowed in from the federal government and insurance payments. Over the next couple years, lots of renovations and retail sales — as everyone repaired their homes and replaced their refrigerators — led to more sales and income taxes, therefore more state revenue.
In July 2008 — six months after Jindal took office — the state’s credit rating was upgraded by all three agencies. That’s three of the eight cited by Jindal, according to Nichols’ statistics and the Bond Commission’s rating history.
In October 2009, Standard & Poor’s and Fitch’s bumped up the rating again. That makes five.
In April 2010, every state in the nation was upgraded by Moody’s and Fitch’s in response to criticisms that they held governments to stricter standards than corporations. Jindal counts those nationwide recalibrations, bringing his total to seven.
In May 2011, Standard & Poor’s raised the state’s bond rating from AA- to AA. And that’s eight.
Over the next four years, everything stayed the same until the negative outlooks of February.
“Politicians always want to put their best foot forward, and they’re going to stretch it. All the candidates do it,” Treasurer John N. Kennedy said.
An upgrade would be a great boost to Jindal’s presidential aspirations. But a downgrade would undermine his campaign narrative.
Mark Ballard is editor of The Advocate Capitol news bureau. His email address is email@example.com, and he is on Twitter @MarkBallardCNB. For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/