TOPEKA — Plummeting revenues, underfunded pensions and millions in court-ordered school spending led Moody’s Investors Service on Thursday to cut the state’s credit rating by a notch.
The ratings agency slightly lowered the state’s credit rating because of mounting financial pressure on the Kansas state budget, partly from massive income tax cuts that Republican Gov. Sam Brownback signed into law in 2012 and 2013.
Moody’s dropped the state from its second-highest rating of Aa1 to its third-highest rating of Aa2. Thirteen other states share the same rating as Kansas. Now 29 states have higher ratings. The last state that Moody’s downgraded was Illinois in June.
The rating cut could lead to higher interest rates on state borrowing, but leading lawmakers said Thursday they didn’t believe that would happen.
Some observers feared the downgrade heralds dire financial times after the massive income tax reductions.
“A well-respected and informed entity that looks at whether government operations are sound has just given us a lower grade,” said Bernie Koch, executive director of the Kansas Economic Progress Council, a group made up of chambers of commerce and businesses across the state. “That should be of great concern.”
The dip in the state’s credit rating comes in the wake of sharply dropping revenue figures released Wednesday. Brownback and other state leaders blamed those numbers on economic policies of the Obama administration.