BRADENTON, Fla. — Louisiana dodged a rating downgrade ahead of an upcoming bond sale amid ongoing concern over the state budget's structural imbalance.
Moody's Investors Service on Thursday affirmed its Aa3 rating on $74 million of new unclaimed property revenue bonds to be issued in coming weeks.
Moody's also maintained a negative outlook on the bonds, saying it reflected continued budget risks and other concerns.
The unclaimed property bond ratings are a notch off the state's Aa2 rating and negative outlook, according to Moody's analyst Marcia Van Wagner.
Officials of Gov. Bobby Jindal's administration had asked rating agencies to return the bond outlook to stable in recent presentations, while State Treasurer John Kennedy said he had hoped to avoid a lower rating.
"We asked Moody's not to downgrade us and to give the next governor and Legislature time to fix the problems," Kennedy said. "I'm thankful that Moody's listened."
Jindal is finishing his last term in office this year.
Van Wagner said the ratings reflect the state's adequate liquidity, speedy responses to downward revenue projections, and debt policies that have lowered the state's debt ratios over time.
"The state rating also reflects continued budget gaps due to underperforming revenues, the use of nonrecurring resources to plug budget gaps, the ongoing slump in the oil and gas markets, and the challenges the state faces in dealing with rising Medicaid and fixed costs," she said.
The state's progress in narrowing the structural imbalance in the fiscal 2016 budget and the additional revenues due from the BP litigation settlement help to partially mitigate the downward pressure of these factors, Van Wagner said.
Kennedy said staving off a downgrade was a "victory" for Louisiana.
Administration Commissioner Kristy Nichols said the rating "affirmation from Moody's reflects that we made concrete progress in structurally balancing the state's budget.
"I'm confident that the outlook will improve in the future as the ratings agencies see that we have been responsive in addressing their concerns," she said.
The state began budget deliberations earlier this year facing a $1.6 billion deficit, which was closed using a mix of recurring and nonrecurring revenue and spending actions.
Jindal signed the budget based on a number of revenue-generating measures implemented by the Legislature, including some that expire in one-to-three years, a factor that was noted in Moody's report.
"There is no denying that Louisiana has serious budget issues," Kennedy said. "Moody's noticed that we're budgeting too much non-recurring money and not doing anything about our runaway pension liability."
Proceeds from the upcoming bond issue will be used to match federal funds to finance ongoing Interstate 49 projects.
On Friday, Standard & Poor's assigned an AA-minus rating to the unclaimed property bonds, and affirmed its AA rating on Louisiana's general obligation bonds. S&P also maintained a negative outlook citing pressures from the state's continued structural imbalance, slow revenue growth, and the expiration of temporary revenue-generating measures.
During Jindal's two terms, Nichols said Louisiana has received eight credit rating upgrades among the three major credit rating agencies.
Four major candidates are vying to succeed Jindal this year - Republicans Scott Angelle, Jay Dardenne and David Vitter, and Democrat John Bel Edwards.
