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Louisiana gets favorable review from national credit agency

Credit ratings from Moody's and other Wall Street agencies help determine interest rates charged when the state borrows money.
Credit: Getty Images/iStockphoto
Aerial photo Downtown Baton Rouge Louisiana USA

BATON ROUGE, La. — Louisiana received good marks Tuesday from a national credit rating agency for the state's improved financial outlook and work to stabilize its budget, boosting one of Gov. John Bel Edwards' main campaign pitches as he seeks a second term.

Moody's Investors Service didn't upgrade Louisiana's credit rating but did change the state's credit outlook from "stable" to "positive." The firm described the improved outlook as an indication the state could see a rating upgrade in a year or two.

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.

Moody's said Louisiana's outlook change "reflects the significant improvement in the state's financial position, its recent record of closing budget gaps with recurring solutions and relative stabilization of its economy."

The rating agency also gave a note of caution, however, saying Louisiana's savings accounts and reserve funds fall short of an appropriate cushion for the state.

Still, the Moody's announcement is another sign that national credit agencies have looked favorably on the financial stabilization Louisiana achieved when Edwards, a Democrat, and the majority-Republican Legislature reached a seven-year tax deal in 2018.

The tax compromise ended a decade of uncertainty about how the state would balance its budget from year to year.

Rating agencies looked unfavorably on the use of piecemeal financing from savings accounts and property sales to patch together budgets, an approach used by former Gov. Bobby Jindal and the Legislature during his two terms. The state eventually saw credit rating downgrades because of the patchwork budgeting approach.

Edwards was certain to use the Moody's statement to bolster his reelection argument with voters as he faces two major Republican challengers on the Oct. 12 ballot. The Democratic incumbent touts Louisiana's financial stability as a hallmark of his term.

"We appreciate that Wall Street is recognizing the progress we're making and are hopeful that as our economy continues to grow and strengthen this will ultimately lead to an upgrade in our overall credit rating," he said in a statement Tuesday.

Edwards' GOP opponents, U.S. Rep. Ralph Abraham and businessman Eddie Rispone, criticize Edwards as raising taxes too high, pointing to recent surpluses as a sign that residents are overtaxed.

Abraham and Rispone pledge to roll back the 0.45% state sales tax that is the centerpiece of the tax deal. They haven't detailed how they'd balance the budget with less money, saying only that they'd make government more efficient and end wasteful spending.

House Republican-led efforts to phase out the sales tax earlier this year failed.

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