Moody's Investors Service lowered its outlook for $4.7 billion in Hawaii general-obligation bonds, saying the state is depleting budget reserves as a tourism slump reduces tax revenue.

The state closed a $2.7 billion deficit for fiscal 2009 through 2011 partially with reserves and faces another $1.2 billion gap as tax collections fall, Moody's said yesterday in changing its outlook to negative from stable.

Reserves that equaled 8 percent of general revenue at the end of fiscal 2008 will be 2.4 percent when fiscal 2010 ends June 30, the New York-based investor rating firm said.

While it lowered its outlook, Moody's affirmed high grades for the state's debt.

Moody's assigned its Aa2 rating, the third highest, to $537 million of general-obligation bonds being sold next week in two series including taxable Build America Bonds. Some proceeds will be used to refund debt outstanding to save $88 million of interest cost through the next two fiscal years, Moody's said.

The outlook rating change could cost Hawaii taxpayers higher interest charges, but state Budget and Finance Director Georgina Kawamura said she remains “;hopeful that it will have minimal, if any, impact.”;

“;While the outlook change may impact rates, it really is dependent on the market on that day,”; she said.

Lowering of the state's rating outlook amounted to a warning, said Gunter Meissner, a professor of finance at the University of Hawaii. Still, it could have a practical affect if it causes investors to demand that the state pay higher interest rates at next week's bond sale or in the future, he said.

“;Financial markets are very sensitive,”; Meissner added. “;You could argue that even an outlook change often changes investors' perceptions; even an outlook change can have a negative impact on the interest rate that the borrower has to pay.”;

Kawamura said the state will issue a Build America Bond, a program created by the Obama administration that provides a taxable, federal subsidy to help states and local governments raise funds. Out of the $537 million, $312 million will be under the program, she said.

“;With it being taxable, the pool of investors broadens because it brings in potential investors that do not have a tax liability,”; Kawamura said.

Economist Paul Brewbaker, principal of TZ Economics, said despite the ratings change, “;relatively, Hawaii is likely to still get a low interest rate.”;

“;It's still a very optimistic moment for the state,”; he said. “;For one thing, lenders and investors are starting to put liquidity back to work, and they weren't doing that last year.”;

Brewbaker said the report only underscores Hawaii's “;slow, long climb”; out of an economic trough, and its vulnerable reliance on tourism.

The U.S. recession curbed travel to Hawaii, causing the number of tourists to fall 10.6 percent in 2008 and 4.5 percent in 2009, Moody's said, citing state figures that call for 2 percent growth this year. Tourism accounts for about 17 percent of nonfarm jobs in Hawaii, nearly twice the national average.

Revenue is forecast to decline 2.5 percent in fiscal 2010 before a 7.6 percent gain in fiscal 2011, Moody's said. “;Tax revenues are not expected to recover to the 2008 pre-recession peak until fiscal 2012,”; the ratings company said.