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Louisiana gets improved outlook from national credit agency

August 24, 2018

BATON ROUGE, La. (AP) — Louisiana’s financial standing with another national credit rating improved Friday, an acknowledgement that state leaders have moved to stabilize the budget and end a decade of uncertainty over finances.

S&P Global Ratings boosted its outlook for Louisiana from “negative” to “stable,” an indication the firm believes the state has moved to a more sound financial position and is no longer at heightened risk of a credit downgrade.

The credit rating agency stopped short of upgrading Louisiana’s credit rating, however, a decision that would make it less expensive to finance roadwork and construction projects.

A second rating agency, Moody’s Investors Service, took similar action in July.

S&P said the improved outlook stems from passage of a seven-year sales tax renewal that will give Louisiana “a measure of budget predictability.” The firm also noted that for a third year, Democratic Gov. John Bel Edwards and the majority-Republican state Legislature balanced the budget without the extensive patchwork fixes once used to pay for ongoing expenses.

Edwards said the S&P decision “is further evidence that what we did was right for Louisiana.”

“For too long, our state lacked the stability and predictability we needed, but those days are over. Thanks to the work of a bipartisan group of legislators, we have a stable budget,” he said in a statement.

In the last special session, Edwards and lawmakers renewed 0.45 percent of an expiring 1 percent state sales tax to avert deep cuts, until mid-2025. Enactment of a seven-year tax was in sharp contrast to a decade of short-term, temporary fixes used to balance Louisiana’s budget, particularly under the eight-year tenure of former Gov. Bobby Jindal.

Wall Street credit rating agencies had repeatedly raised concerns about Louisiana’s use of impermanent solutions for long-term budget imbalances. Three major rating agencies, including S&P and Moody’s, downgraded Louisiana’s credit rating in 2016 and 2017, making it more expensive to borrow money.

In its latest credit profile for Louisiana, S&P did raise some concerns, however, about the state’s “sluggish economic trends,” the impact of fluctuating oil and gas prices on state income and the state economy and retirement debts.

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Follow Melinda Deslatte on Twitter at http://twitter.com/melindadeslatte

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