Standard & Poor's Ratings Services said it lowered its issuer credit rating on the state of Kansas to AA from AA-plus.
At the same time, Standard & Poor's downgraded Kansas' annual appropriation-secured debt to AA-minus from AA. The outlook on both ratings is negative.
"The downgrades reflect our view of a structurally unbalanced budget, following state income tax cuts that have not been matched with offsetting ongoing expenditure cuts in the fiscal 2015 budget," said Standard & Poor's credit analyst David Hitchcock. In its opinion, recent shortfalls in income taxes will leave both fiscal years 2014 and 2015 with ending general fund balances much less than projected in the enacted fiscal 2015 budget.
"The negative outlook reflects our belief that there will be additional budget pressure as income tax cuts scheduled in future years go into effect, or if midyear revenue shortfalls resume, although the state recently announced a small positive revenue variance for July," Hitchcock added. The state could easily face a negative general fund balance in fiscal 2015 should even relatively small negative revenue variances resume, absent midyear corrective action, the rating agency said in a statement.
