Jackson Free Press

JACKSON, Miss. (AP) — The bond credit rating agency Moody's Investor Service has given Mississippi a negative credit outlook because the state dipped into its rainy day fund to cover budget shortfalls, but the state's bond rating remains unchanged.

Moody's says officials' withdrawal of $108 million from reserves "further weakens the state's financial position."

The credit outlook, issued Monday, does not change the state's bond rating, but state Treasurer Lynn Fitch said Tuesday that it is "essentially a warning shot over Mississippi's bow," and she hopes lawmakers take note. A decline in the bond rating would increase the state's expenses for long-term borrowing.

"Now, it is more important than ever for our Legislature to institute truly conservative fiscal policies, like spending within our means, keeping borrowing to a minimum, and shoring up our rainy day fund," Fitch said in a statement.

Moody's estimates that Mississippi's available rainy day fund balance has dropped to 1.4 percent of revenue for the 2016 budget year, which ended June 30. Two years ago, the balance was equal to 6.7 percent of state revenue.

Moody's noted that Mississippi had $65 million in budget cuts during the past year, as state tax collections fell short of expectations. The agency also noted the comprehensive annual financial report for the 2015 budget year was published late, and that legislative leaders announced a $56 million mistake in the estimate of how much revenue the state expects to collect during the 2017 budget year, which started July 1.

"On top of revenue underperformance, Mississippi just passed a record $415 million tax cut to be phased in over 12 years," the Moody's report said.