When the Bond Commission met last Thursday, nothing was said publicly about the precarious situation with the state’s credit rating. Behind the scenes, though, it’s a different story.
“I’ve got a conference call with them Monday,” state Treasurer John Kennedy said in an interview, after the meeting.
Prior to the governor signing the new budget into law Friday, the Jindal administration had conference calls with Moody’s, Fitch, and S&P last week, to which Kennedy was not invited. Instead, he’s remedying that presumed oversight today.
“I do know they have a lot of questions, and I’m going to be trying to answer some of those questions.”
In February, Moody’s stopped just short of downgrading Louisiana’s credit rating, putting the state on “negative credit watch”. In April, that agency lowered LSU’s credit outlook from “positive” to “stable”. And a Moody’s analyst issued a statement at the end of the legislative session, stating: ”The legislature has closed the $1.6 billion gap with a heavy reliance on one-time measures. This means the state will likely see continued large budgetary gaps next year, when it has to craft the budget for fiscal year 2017.”
Kennedy says if the state’s credit rating is going to change, it will happen shortly.
“The issue is, after the legislative session, will Moody’s downgrade us, or keep us on negative credit watch, maintaining status quo? I give us a 50-50 chance,” the Treasurer said.
A downgrade doesn’t mean the state won’t be able to issue bonds, borrowing money for needed construction projects. It simply means the interest rates will be higher, and cost Louisiana more of the money it doesn’t have.
Kennedy says today’s call will reiterate some of what he previously told the credit agencies about the structural budget deficits, adding his take on the results of the legislative session.
“I told them it would take us several years to fix it. And so I’m going to remind them of that prediction, and tell them we’ve made progress, but we never expected to solve the whole problem in one legislative session.”
He hopes it’s enough to persuade the credit agencies against dropping Louisiana’s rating. But Kennedy also expects his version of the state’s fiscal status will be much different than what the administration said during their conference calls.
“We’ll tell them the unvarnished truth,” Kennedy promises, adding,“Our finances are in the ditch.”
Governor Jindal is concerned enough to have used the possibility of a state credit downgrade as reason for vetoing a bill granting cost-of-living increases to state retirees. That veto has angered some lawmakers, reviving talk of holding a veto override session next month.