S&P Global Ratings revised the outlook on Kansas' AA-minus credit rating to negative from stable on Wednesday, citing weak economic trends and structural budget pressures.
The credit rating agency faulted the state for its continuous use of one-time revenue measures to shore up operational spending. For the upcoming biennial budget, nonrecurring measures include a plan to sell bonds backed by Kansas' share of a nationwide settlement with U.S. tobacco companies, liquidation of a capital reserve, and pension underfunding, S&P said.
"We believe the next two years will remain pressured and the proposed budget does not adequately provide solutions to Kansas' ongoing structural deficits," said S&P analyst Oladunni Ososami in a statement.
She added Kansas has a one in three chance of a credit rating downgrade in the next two years.
The Kansas budget is feeling the effects of action taken by Governor Sam Brownback and the Republican-controlled legislature in recent years to cut corporate and other income taxes to help the state compete with bordering Missouri and other states for business development and jobs.
On Monday, the Republican governor blasted a legislative plan to hike income taxes.
The state has also been battling school districts in court over adequate funding.
(Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)