When state Treasurer John Kennedy addressed the Baton Rouge Press Club Monday, much of his speech focused on his usual litany.
“You’ve heard me talk about this before,” he said. “We have a spending problem, not a revenue problem.”
He also gave his take on the trio of legislative sessions just ended.
“Governor Edwards won these last 3 sessions,” Kennedy observed. “The governor beat ‘em like a sugar mill mule. Unfortunately, in my opinion, the Louisiana taxpayer lost.”
When it came to the Q&A at the end, reporters wanted Kennedy’s explanation for a statement Governor John Bel Edwards made after the special session ended last week.
“We have a cash flow problem,” the governor stated Thursday night. “And there is every possibility that we’re going to have to take out a loan to pay regular, ordinary bills of the state of Louisiana.”
Kennedy said it’s a problem that occurs when you close the books on one fiscal year, and open up the books on the next one. The new year begins at zero revenue.
“If I don’t have enough money in the General Fund to pay a bill, I can borrow from statutory dedications, which are kept in separate funds,” the Treasurer explained, adding the past several years of so-called “funds sweeps” have contributed to the need for what’s known as “interfund borrowing”.
“When the Legislature went in and reduced the amount of money in those statutory dedications, it reduced the amount of money that I have to borrow from,” Kennedy said. “And that is causing the cash flow problem.”
He says borrowing from an outside source is something many local governmental agencies do regularly.
“We’ll do what’s called a ‘Revenue Anticipation Note’, which means you basically do a short-term loan to enhance your cash flow and then you pay it back in like 3 or 4 months.”
But how will the credit rating agencies view the state doing that?
“I don’t know. I haven’t talked to them,” Kennedy said, adding ruefully, “There’s not much more that they can do to us.”