Moody's Raises Louisiana's Bond Credit Rating After 6 Years

BATON ROUGE, La. (AP) — Louisiana’s bond credit rating has moved up a notch.

The new rating by Moody’s Investors Service will save the state about $750,000 a year in interest for every $300 million in bonds issued, state Treasurer John Schroder said.

Louisiana has made significant progress “restoring its financial reserves and liquidity in recent years by structurally aligning revenue and spending, despite a generally declining trend and volatility in gas and oil production and unfavorable demographic trends,” Moody’s said in a news release. The demographic trends include slow population growth and low per-capita income.

The rating, at Aa3 since early 2016, was raised Wednesday to Aa2.

“When I came into office, we were facing a huge fiscal cliff and unstable finances," Gov. John Bel Edwards said. "By working together with the Legislature, we’ve been able to turn things around. We now have surpluses instead of deficits, we’re investing again in education and infrastructure and we are no longer relying on one-time money for recurring expenditures.”

Credit ratings from Moody’s and other Wall Street agencies help determine interest rates charged when the state borrows money to finance roadwork and construction projects.

Two other firms also downgraded Louisiana's ratings in 2016 and 2017 because of the patchwork budgeting approach used by former Gov. Bobby Jindal and the Legislature during his two terms, when budgets were balanced on financing from savings accounts and property sales.

Edwards, a Democrat, and the majority-Republican Legislature reached a seven-year sales tax deal in 2018.

“Between the pandemic and natural disasters, nothing we have done over the past several years has been easy, but our commitment to strong financial management is paying dividends for Louisiana,” Edwards said.

Schroder called the upgrade long overdue, saying the past five years have shown “strong financial performance and significantly increased reserves.”

The 0.45% tax is scheduled to expire in mid-2025, and state representatives have made competing proposals about how to deal with that. One bill would start phasing out the tax next year. The other would dedicate its revenue for the next three years to a new Mississippi River bridge in Baton Rouge, an Interstate 10 bridge in Lake Charles and expansion of the Interstate 49 South corridor.