CINCINNATI, Ohio - A major credit ratings agency says Ohio's credit standing is at risk, saying the state was counting too much on gambling dollars that are now in doubt.
Standard & Poor's cited uncertainty over racetrack slot machines and the state's need for their potential revenues to balance the budget. The state's high court has blocked Ohio's plans to use video lottery machines at horse-racing tracks while a group tries to get the issue on the 2010 general election ballot.
The S&P Ratings Services dropped its outlook for Ohio to "negative" from "stable." The agency still gives a high long-term rating to Ohio bonds, saying the state has a history of managing volatile budgets. The lower a state's credit rating, the more expensive it becomes to borrow money to finance roads and other projects.
But S&P said Ohio is running out of financial flexibility, risking a credit cut ahead.
Standard & Poor's credit analyst Robin Prunty said in a Wednesday report on the change that the nearly $1 billion the state expected from racing slots was a key component to balancing its budget.
"We continue to believe that below-average economic performance and a high reliance on nonrecurring measures to balance the current budget will make the return to structural balance more challenging," she added in the report.
A spokeswoman for Democratic Ohio Gov. Ted Strickland said Thursday the move demonstrates the tough budget situation Ohio and other states face in the current economy.
"The change in outlook underscores the seriousness of the situation and the need for a collaborative response to Ohio's budget challenges," spokeswoman Amanda Wurst said. She said Ohio's credit ratings and budget-management reputation remain high.
Another agency also recently expressed concern about Ohio's credit picture. Moody's Investors Services gave the state a negative outlook over factors including the reliance on expanding gambling.
The Ohio Supreme Court ruled Monday in favor of LetOhioVote.org, a committee that seeks to put the racing slot question on the November 2010 ballot. The court froze slots implementation as described in the state budget for 90 days to give the group time to collect the necessary number of signatures - 6 percent of voters in the last gubernatorial race.
Strickland had authorized the slots by executive order and the Legislature included their proceeds in the state budget plan. Strickland has said the slots plan was combined with $2 billion in cuts and program reductions to avoid raising taxes.
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