Years of putting off hard budget decisions could mean another dip for the Minnesota's credit score.
On the heels of a "kick the can down the road" budget solution, Moody’s Investor Service placed Minnesota on a negative outlook for its bond rating.
“This is a reminder that having a strong, balanced economy is not enough to keep high credit ratings. Sooner or later, we need to fix the state’s budget so that it does not rely on one-time solutions,” said Jim Schowalter, Minnesota Management and Budget commissioner.
The less positive reports could make it more expensive for Minnesota to borrow money.
Last month Fitch rating agency downgraded Minnesota from a perfect AAA rating to AA+. The agency said while Minnesota's credit was fundamentally strong, years of budget gimmicks and anticipation of more had taken their toll.
"It appears likely that the outcome will continue the use of non-recurring balancing tools and that deferred payment obligations will continue to be a drag on the state's finances," Fitch's said.
The agency was right. The budget deal that ended a 20-day shutdown relied on delayed payments to schools and borrowing to close the budget gap.
Moody's had similar complaints.
"The negative outlook primarily reflects the growing negative GAAP undesignated unreserved fund balance, political intractability that has resulted in the reliance on one-time measures to solve the $5 billion budget gap in the current fiscal 2012-2013 biennium, and the likelihood of future structural budget gaps as a result of the use of the one-time budget measures," the agency said.
The agency still maintained the Aa1 rating it has long given Minnesota.
The third major rating agency, Standard and Poors, still rates Minnesota AAA but hasn't made a recent update to its rating.
Read the full Moody's rating update: