TOPEKA — Citing the projected possible decline in state revenue stemming from big income tax cuts, Moody’s Investors Service downgraded bond ratings for a Kansas Department of Commerce program that used to pay for a worker training program.
The lower rating affects about $200 million in outstanding debt for the now-defunct Investments in Major Projects and Comprehensive Training program — or IMPACT — that helped some employers train new workers or retrain existing ones.
“The final maturity on the IMPACT bonds is 2023, by which time Kansas may have fully removed the income tax,” the credit rating service reported this week. “So far, there is no assurance the state will allocate revenue from a different source or take other steps to protect bondholders.”
The downgrade moves the bonds from a high-tier rating to a mid-tier rating that still remains in the A category of its grading system.
The service says the rating could go back up if the state makes some changes to enhance bondholder security, but it could fall farther if the state does nothing and state revenues fall or the economy falters.
The downgrade follows approval of more income tax reductions signed into law by Gov. Sam Brownback this year after large cuts last year.
Brownback and his conservative allies say the income tax reductions, which included offsetting measures to bring in more revenue by decreasing the value of tax deductions, will spur the economy, create more jobs and bring in more state revenue.
The new tax law limits the growth of state revenues to 2 percent and channels additional growth toward more income tax cuts.