- Associated Press - Friday, February 13, 2015

BATON ROUGE, La. (AP) - Louisiana has been spared a credit rating downgrade - for now.

Two national rating agencies - Moody’s Investors Service and Standard & Poor’s Rating Services - announced Friday they were keeping Louisiana at its current credit rating. But both moved the state from a “stable” to “negative” credit outlook.

Gov. Bobby Jindal made a personal pitch to Moody’s about the health of Louisiana’s economy and finances, after the rating agency said it was considering a downgrade amid the state’s ongoing budget problems.

“We appreciate Moody’s affirming the state’s credit rating, which has come as a result of acting quickly and responsibly when our state has faced revenue problems,” Jindal said in a statement.

Other state officials spoke with both rating agencies this week, seeking to reassure them about Louisiana’s financial condition.

Ratings from the two credit agencies help determine interest rates. The change in outlook will raise state costs for borrowing money, but not nearly as much as a downgrade would have.

“It could have been a lot worse, but it could have been better. I was worried we were going to get shot in the head, but we just got shot in the arm,” said state Treasurer John Kennedy. “The move from stable to credit negative is not something to celebrate.”

A downgrade on Jindal’s watch also would have been seen as a negative commentary on his fiscal management as he’s considering a 2016 White House bid.

The rating agencies have raised concerns about the short-term patches Jindal and lawmakers have used to balance the budget, maneuvers that have created annual budget shortfalls. Moody’s called it a “growing structural imbalance.”

The state has a $1.6 billion shortfall in the budget year that begins July 1, more than $1 billion of it tied to the use of patchwork funding to pay for ongoing state expenses. Plummeting oil prices have worsened the budget woes. Also cited as a problem by the rating agencies was the state’s multibillion-dollar pension debts.

Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, said Jindal will address the rating agency concerns by proposing a budget that relies less on piecemeal financing and more on stable, recurring revenue.

“They’re looking for us to make, long-term sustainable changes,” Nichols said.

Among Jindal’s proposals, she said, would be to put a cap on some tax credits, to keep the state from paying above a person’s or business’ tax liability.

For tax credits deemed refundable, a tax break can exceed the actual taxes owed. In such instances, the state writes a check to cover the cost of the rest of the tax break.

Nichols said the state spends $777 million a year on refundable tax credits, and $589 million is paid above the tax liability. She didn’t spell out, however, which tax credits Jindal will propose to cap.

Kennedy expects the state’s credit rating to be downgraded if Jindal and lawmakers don’t address the budgeting concerns in the legislative session that begins in April.

Standard & Poor’s credit analyst Sussan Corson wrote that whether the state focuses on “structural solutions” to its budget problems “will be a key determinant of its future credit stability in the next two years.”

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