(The Center Square) – Louisiana could pay less to borrow following a credit upgrade, although the state Department of Treasury has not provided an estimate of potential taxpayer savings.
Fitch Ratings on Friday raised Louisiana’s general obligation bond rating and issuer default rating from AA-minus to AA, with a stable outlook.
Fitch attributed the improvement to implementation of 2024 revenue policy changes that reduced a projected structural budget gap, along with solid budget performance and continued financial flexibility.
For taxpayers, the potential benefit is lower borrowing costs. Treasury said the stronger rating could help Louisiana obtain more favorable financing terms, but savings would depend on market conditions, the structure of individual bond issues and other financing factors.
For context on the state’s borrowing costs, a May State Bond Commission presentation listed about $3.5 billion in outstanding general obligation principal as of May 1, plus $1.3 billion in interest payable over the remaining repayment periods. Those figures describe existing obligations, not potential savings from Fitch’s upgrade.
The commission’s January debt report projected about $414 million in general obligation debt service for fiscal 2027, based on debt outstanding at the end of 2025. That figure includes principal and interest and predates subsequent borrowing.
In April, Louisiana sold $348.7 million in general obligation bonds, according to the May presentation. Those bonds mature in 2046 and carry average annual principal and interest payments of about $27.5 million. The sale preceded Fitch’s upgrade.
More borrowing requests appeared in the commission’s Oct. 15 meeting materials, including a request for $55.6 million in general obligation bond authorization for state capital projects. An authorization request does not establish when bonds will be sold or what interest rate they will carry. The timing and terms of a sale following Fitch’s upgrade have not been confirmed.
The Center Square was unsuccessful prior to publication getting comment from the Louisiana Department of Treasury.
The improved rating comes with continuing financial pressures. Fitch cited slow economic growth, potential federal policy changes, spending pressures and adjustments to Louisiana’s revenue structure as challenges policymakers must manage.
Fitch also recognized Louisiana’s relatively low long-term liability burden compared with available resources and its ability to manage expenditures.
Fitch raised certain bonds supported by annual legislative appropriations from A-plus to AA-minus.
State Treasurer John Fleming welcomed the upgrade in a Monday release.
“This is welcome news for Louisiana taxpayers and a strong affirmation that responsible fiscal management matters,” Fleming said.
Fleming also said maintaining the improvement would require continued budget discipline and oversight of public funds.
“An improved bond rating is more than a number on a financial report,” Fleming said. “It sends a positive signal about Louisiana’s creditworthiness and our ability to meet our financial obligations. Our responsibility now is to protect that progress, manage taxpayer dollars prudently, and ensure that government lives within its means.”