Standard & Poor’s downgrades bond rating for Kansas

08/06/2014 10:30 AM

08/06/2014 9:18 PM

A second bond rating agency has downgraded Kansas’ standing because of declining revenue following massive income tax cuts signed into law by Gov. Sam Brownback.

Standard & Poor’s on Wednesday reduced the state’s credit rating a notch to AA from AA+, citing a structural imbalance between revenue and spending in the state budget.

The bond rating agency said the state’s failure to match the income tax cuts with reductions in spending will leave the state with dangerously low reserves.

Analysts projected that the state could burn through its reserves this fiscal year, putting more pressure on lawmakers to cut the budget.

The rating cut could lead to higher interest rates on state borrowing, ultimately costing taxpayers more money.

Brownback said he didn’t think the bond rating agencies were analyzing Kansas correctly: “The bond rating agencies don’t like you cutting taxes.”

The governor said the state will honor its debt obligations: “These are still high-grade bonds.”

In May, Moody’s Investors Service cited similar concerns when it reduced the state’s bond rating one level because of mounting financial pressure on the Kansas budget, partly because of the income tax cuts.

Moody’s warned that cutting spending might not be easy given court-ordered spending on schools, Medicaid demands and pensions.

To reach Brad Cooper, call 816-234-7724 or send email to bcooper@kcstar.com.

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