Kansas could soon issue a billion dollars in bond, but that idea isn’t getting a glowing review from Moody's Investors Service, one of the nation's leading bond-rating companies. The state wants to borrow money to help shore-up the finances of the Kansas Public Employees Retirement System, or KPERS. Moody’s pointed to the state’s recent budget troubles when giving the Kansas bonds what it calls a “below-average rating.”
Catherine Shenoy is with the University of Kansas School of Business. She says the state’s bonds would still be considered a pretty safe bet by many investors. That’s because the state has options for raising revenue if needed to pay back the bonds.
“It is still a very secure bond because the rating agencies know that they could increase taxes if the political will were there,” says Shenoy.
The state is hoping it can generate more in investment returns from the borrowed money than it will pay out in interest on the bonds. Some critics say the strategy is risky.