Louisiana outlook revised to positive by Fitch

Louisiana's rating outlook was revised to positive from stable by Fitch Ratings, which cited the anticipated impact of the state's revenue policy changes.

The improved outlook affects the state's AA-minus issuer default, general obligation and A-plus appropriation-backed bonds ratings.

The state passed policies in fall 2024 ? being rolled out at different points this calendar year ? that cut personal income taxes, eliminate the corporate franchise tax, cut the corporate income tax rate but raise the state sales tax rate.

The changes "should allow the state to avoid an anticipated fiscal 2026 budget gap and preserve its significant fiscal flexibility as evidenced by improved dedicated operating reserve levels," Fitch said.

A rating upgrade depends on the state's "successful execution of the complex and substantial tax policy changes through at least most of the current fiscal year while maintaining structural balance," the rating agency said.

The state's AA-minus rating reflects the state's broad, albeit somewhat concentrated and slow-growing economy, strong budgetary control and moderately low long-term liability burden," Fitch said. Revenue growth should "remain slow and pressure future operating budgets," the agency said.

"Improved financial operations have supported regular operating surpluses and reserve deposits in recent years, positioning the state well for future downturns," Fitch said.

Louisiana State Treasurer John Fleming said, "The news is a clear signal that Louisiana is turning the corner and building a stronger fiscal foundation for the future. When an agency like Fitch Ratings begins to view our outlook more positively, it tells companies, investors, and the people of our state that we are serious about getting our fiscal house in order."

Louisiana state general fund revenues have been sliding compared to figures for the preceding fiscal year. The state's own-source revenues declined 2.3% in fiscal 2025 from fiscal 2024, according to Lucy Dadayan, principal research associate at the Urban-Brookings Tax Policy Center of The Urban Institute. Fiscal 2025 reaped $12.24 billion in revenue whereas fiscal 2024 brought in $12.53 billion.

In the first three months of the current fiscal year (which began July1) revenues were down 5.6% from the last fiscal year, according to data Dadayan collected.

Fitch didn't immediately respond to an inquiry about this pattern.

Louisiana's GO bonds are rated Aa2 by Moody's Ratings and AA by S&P Global Ratings and KBRA.