Louisiana's rating outlook was revised to positive from stable by Fitch Ratings, which cited the anticipated impact of the state's revenue policy changes.
The improved outlook affects the state's AA-minus issuer default, general obligation and A-plus appropriation-backed bonds ratings.
The state
The changes "should allow the state to avoid an anticipated fiscal 2026 budget gap and preserve its significant fiscal flexibility as evidenced by improved dedicated operating reserve levels," Fitch said.
A rating upgrade depends on the state's "successful execution of the complex and substantial tax policy changes through at least most of the current fiscal year while maintaining structural balance," the rating agency said.
The state's AA-minus rating reflects the state's broad, albeit somewhat concentrated and slow-growing economy, strong budgetary control and moderately low long-term liability burden," Fitch said. Revenue growth should "remain slow and pressure future operating budgets," the agency said.
"Improved financial operations have supported regular operating surpluses and reserve deposits in recent years, positioning the state well for future downturns," Fitch said.
Louisiana State Treasurer John Fleming said, "The news is a clear signal that Louisiana is turning the corner and building a stronger fiscal foundation for the future. When an agency like Fitch Ratings begins to view our outlook more positively, it tells companies, investors, and the people of our state that we are serious about getting our fiscal house in order."
Louisiana state
In the first three months of the current fiscal year (which began July1) revenues were down 5.6% from the last fiscal year, according to data Dadayan collected.
Fitch didn't immediately respond to an inquiry about this pattern.
Louisiana's GO bonds are rated Aa2 by Moody's Ratings and AA by S&P Global Ratings and KBRA.
