Louisiana Regains Bondability, But Not Enough

Oct 20, 2017

With more than $1.3-billion in state revenue coming off the books next July 1st, there was concern Louisiana wouldn’t be able to borrow any money next fiscal year. For Bon Commission members, those fears were alleviated Thursday.

“We had some various refundings that have had a positive impact on our debt capacity,” Bond Commission director Lela Folse told the panel. “New projections show that we can issue $225-million in fiscal year ‘19.”

The state constitution limits borrowing by saying annual repayment cannot exceed six percent of state General Fund revenues, and the upcoming expiration of “temporary taxes” – the so-called “fiscal cliff” severely reduced the FY 19 debt capacity.

Commissioner of Administration Jay Dardenne weighed in, saying, “This is good news, but we nevertheless need to proceed very cautiously. If that cliff is not resolved and we can’t have the general operating expenses of government managed, it’s going to be very difficult for us to then say it’s okay for us to take on more debt.”

And Bond Commission financial advisor Renee Boicourt also urged caution.

“It still will constrain the pace of construction. There’s not enough to keep the traditional run rate going,” she said, regarding the state’s use of borrowed bond money for construction projects, generally referred to as “capital outlay”.

“There a little breathing room,” remarked acting Treasurer Ron Henson, “But not enough.”

Bond Commission members were also given a projection of borrowing capacity should a portion of the fiscal cliff be resolved. House Ways and Means chair Neil Abramson, who authors the annual capital outlay bill, pounced on those numbers.

IF the legislature does something to increase revenue, decrease expenditures, the economy gets better, or the revenues come in – whatever it may be, if we have $285-million in new revenue, we would be able to borrow up to $360-million in Fiscal Year 2019?” Abramson asked. “As opposed to – if everything stays status quo – our number’s 225?

Boicourt reminded them that just because you can do something doesn’t mean you should.

“The way the math is done is it’s the 6 percent, which is the constraint in the Constitution. That the Constitution allows 6 percent to be spent on debt service doesn’t mean there’s enough room in the budget to spend 6 percent on debt service.”