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Moody’s gives Kansas a ‘negative’ outlook

Moody’s Investors Service has issued a “negative” outlook on $49 million in revenue bonds being issued by Kansas because of the state’s budgetary financial pressures.

The credit rating agency rated the bonds Aa3, which is still considered high quality.

However, Moody’s said the revenue bond rating is one notch below the state’s overall rating of Aa2.

In May, Moody’s changed its overall credit outlook for Kansas to “negative” while affirming its Aa2 rating.

In a report this week, Moody’s said the negative outlook “is consistent with the state’s ongoing difficulties in regaining structural budget balance and getting on a path to sounder funding of its pension liabilities. By continuing to balance its budget with unsustainable, nonrecurring resources, including pension underfunding, it is accumulating large and expensive long-term liabilities that it will be paying off for a long time.”

The revenue bonds are scheduled to be sold later this month, Moody’s said. Proceeds will be used to refinance debt, which should save the state money.

Another major credit rating agency — Standard & Poor’s Global Ratings —recently dropped its rating for Kansas to AA1 from AA, several months after putting the state on a “negative” credit watch.

Kansas has struggled to balance its budget since Gov. Sam Brownback successfully pushed the Republican-dominated Legislature to slash personal income taxes in an effort to stimulate the economy.

The state has taken issue with some previous critiques by credit rating companies. But earlier this summer, the state’s budget director said Kansas must do more to bring spending and revenue in line with each other.