Nixon: Senate Bill 509 would jeopardize Missouri's bond rating

(From Gov. Jay Nixon)

A report this week from the independent rating agency Moody’s demonstrates the real danger tax schemes like Senate Bill 509 pose to Missouri’s spotless AAA credit rating, Gov. Jay Nixon said today. Following the downgrade of Kansas’ credit rating by Moody’s, the Governor visited Commerce Bank, the largest state-chartered bank in Missouri, to discuss how Senate Bill 509 would jeopardize Missouri’s AAA credit rating and increase costs for local communities.

“This week’s report by Moody’s demonstrates the very real and dangerous consequences of fiscal experiments like Senate Bill 509,” Gov. Nixon said. “For decades, Democrats and Republicans have worked together to keep Missouri on a fiscally responsible path and protect our spotless AAA credit rating – a rock solid foundation of fiscal certainty that Senate Bill 509 would put at risk. Moody’s independent analysis should be a wakeup call for the legislature to set aside these dangerous schemes and start working on a responsible approach that will protect public education, our credit rating and our economy.”

If Senate Bill 509 becomes law and Missouri’s credit rating is downgraded, taxpayers could see hundreds of millions in additional interest while lawyers and lobbyists get a massive tax break.”

Earlier this week, Moody’s Investors Service downgraded Kansas’s bond rating, citing tax experiments in that state similar to those contained in Missouri’s Senate Bill 509. Like a consumer’s credit score, the state’s credit rating helps determine the interest rates for bonds at the state and local level.

According to Moody’s: “The downgrade reflects Kansas’ relatively sluggish recovery compared with its peers, the use of non-recurring measures to balance the budget, revenue reductions (resulting from tax cuts) which have not been fully offset by recurring spending cuts, and an underfunded retirement system for which the state is not making actually required contributions.” Moody’s continued: “Inability to maintain a positive, audited general fund balance position would indicate that the state is also no longer adhering to its traditionally conservative financial management practices.”

In 2012, Kansas passed legislation creating an exemption for business income reported by “pass-through entities” such as LLCs and corporate partnerships. Senate Bill 509 proposes a similar business income exemption.

Missouri has a perfect AAA credit rating from all three leading credit rating agencies – Moody’s, Fitch Ratings and Standard & Poor’s. Because of this spotless record, school districts and local governments pay a lower interest rate on bonds issued. If Missouri were to be downgraded like Kansas, this interest rate would increase for future bond projects, resulting in hundreds of millions of dollars in additional interest payments.

The full text of Moody’s analysis is available here.