BRADENTON, Fla. - Two rating agencies revised Louisiana's outlook to negative Friday, both citing the state's growing structural budget imbalance.
Moody's revised its outlook while affirming its Aa2 rating ahead of Louisiana's upcoming sale of $225 million in general obligation refunding bonds. The state has $2.7 billion in outstanding GOs.
Standard & Poor's revised its outlook while affirming an AA rating on Louisiana GOs.
"The negative outlook reflects the state's growing structural budget imbalance, projected at $1.6 billion for fiscal 2016, or about 18% of the $8.7 billion general fund even after significant budget cuts of recent years," said Moody's analyst Marcia Van Wagner.
"The state has options for reducing the imbalance, including scaling back various tax credit programs, but the overall scale of balancing measures needed may further deplete resources and reduce the state's liquidity, which has been one of its strengths," she said.
"The negative outlook reflects our view of a combination of recent revenue declines related to falling energy prices and a large and growing structural budgetary shortfall identified for fiscal 2016," said Standard & Poor's analyst Sussan Corson.
Moody's earlier in February had warned about declining revenues in part because of lower oil prices.
Gov. Bobby Jindal called Moody's on Thursday to talk with analysts about steps being taken to balance the budget. Jindal said his discussion was "productive."
The state has been "placed on probation," State Treasurer John Kennedy said Friday in response to Moody's outlook action.
"This should be a wake-up call that we need to stop spending more than we take in," Kennedy said. "We've drained our trust funds, we've relied on nonrecurring money and we've had to cut the budget in the middle of the fiscal year for too many years now. Many have been warning that this day would arrive, and it has."
Kennedy also said that Moody's outlined the "playbook" for the state to maintain its credit ratings.
"This is not rocket science, its fiscal conservatism," he said. "The administration is out of smoke and mirrors. We need to get to work before our taxpayers pay for the administration's mistakes with higher interest rates."
On Wednesday, Fitch Ratings assigned an AA rating to the upcoming GO deal, and said the outlook is stable.
Standard & Poor's also assigned the negative outlook to its AA-minus rating of Louisiana appropriation debt.