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Kansas budget woes weigh on state's credit ratings

Republican Kansas Governor Sam Brownback speaks to supporters after winning re-election in the U.S. midterm elections in Topeka, Kansas, November 4, 2014. REUTERS/Mark Kauzlarich RTR4CVCP

(Reuters) - Moody’s Investors Service on Tuesday slapped a negative outlook on Kansas’ Aa2 credit rating, citing the state’s reliance on one-shot measures to balance its budget.

That followed action late last month by Standard & Poor’s, which put Kansas’ AA rating on review for a possible downgrade after the state lowered its revenue estimates for the current and next fiscal year by $228.7 million.

Governor Sam Brownback plans to divert $185 million in sales tax revenue from the state’ highway fund to the general fund and delay a $96.5 million fiscal 2016 pension payment to help fill the gap.

“By continuing to balance its budget with unsustainable, nonrecurring resources, including pension underfunding, it is accumulating large and expensive long-term liabilities that it will be paying off for a long time,” Moody’s said in a statement.

The credit rating agency also revised the outlook on $2.1 billion of Aa2-rated Kansas highway revenue bonds to negative from stable.

The Kansas budget is feeling the effects from action taken by 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.

The state’s fiscal year begins on July 1.

Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis