Louisiana’s bond rating improves, which should save the state money

One of the three national credit rating agencies upgraded Louisiana’s bond rating at the end of last week. The state should now expect to pay less in interest when it borrows money for roadwork and other construction projects.  

Fitch Ratings moved Louisiana’s credit from “AA-” to “AA,” according to a statement released by the global agency Friday. It attributed the upgrade, in part, to new tax laws Gov. Jeff Landry and the Louisiana Legislature approved two years ago. 

“The upgrade reflects the state’s successful implementation of 2024 revenue policy changes, which reduces a projected structural gap,” said the Fitch report. 

Landry and state lawmakers skirted a major state budget deficit by eliminating an automatic sales tax cut before it took place in 2025. Instead, the governor and legislators raised the sales tax rate further to offset a new income tax reduction. They also freed up more money by shifting revenue dedicated to major transportation projects into accounts for expenses such as healthcare and higher education. 

State Treasurer John Fleming, R-Minden, said the credit rating improvement should be celebrated. 

“We must continue building on this progress to ensure that Louisiana’s finances remain strong for years to come,” he said in a written statement. 

Louisiana Senate President Cameron Henry, R-Metairie, and House Speaker Philip DeVillier, R-Eunice, said the legislature will continue to focus on bringing long-term fiscal stability to the state.

“We are not done yet, but we are making the changes necessary to secure our state’s fiscal future,” Henry said in a written statement.

A reversal of the new tax policies — for example, a future sales tax rate cut — could cause the rating agency to downgrade Louisiana’s credit in the future, Fitch said in its report. 

“Slow economic growth, the planned partial rollback of the 2024 sales tax increase and the relocation of certain revenue from the general fund to transportation projects could constrain long-term revenue growth,” the report states. “These factors will be important determinants of future financial performance.”