S&P Global Ratings Friday revised its outlook on Mississippi to negative from stable and affirmed the state's general obligation bonds at AA.
S&P also the AA-minus rating on the state's appropriation-backed special obligation bonds and lease revenue certificates of participation.
In addition, S&P affirmed the A rating on the Mississippi Development Bank's outstanding debt, reflecting the state's moral obligation pledge on various obligations issued on behalf of counties, municipalities and districts.
The outlook on all ratings is negative.
"The outlook revision reflects our view of elevated credit risks stemming partly from persistently weak economic and demographic trends, which could result in an increasingly challenging budget environment as the state manages through its phased-in income tax reductions," said Rob Marker, an S&P credit analyst.
"The risk of future budgetary pressure is further elevated due to pension contributions falling short of their actuarially determined contribution amounts in each of the past three years and a relatively high level of unfunded pension liabilities," he said.
"Finally, recurring delays in adopting the state's annual revenue forecasts or a reduced commitment to debt management policies could worsen our view of the state's budgetary performance and Financial Management Assessment," Marker said
S&P noted the long-term rating reflects Mississippi's strong government framework and responsive financial and budget management practices that have historically aided structurally balanced budget performance and maintenance of strong reserve balances.
The state's full faith and credit secures the existing GOs while the state's appropriation-backed special obligation bonds and lease revenue certificates of participation are rated one notch below the GOs and the Mississippi Development Bank bonds are secured by the state's moral obligation pledge are rated three notches below the GOs.
