Without a new infusion of cash, Louisiana is projected to run out of money to pay for college building repairs, economic development projects and state-funded road work in about four months, said Whit Kling, director of the State Bond Commission that oversees construction borrowing and state debt calculations.
State senators heard the troubling news of the latest money problem in a briefing about Louisiana’s finances by Sherry Phillips-Hymel, the chamber’s chief budget analyst. She told senators that the capital outlay fund is “very, very low.”
“The fund is broke. The fund does not have sufficient cash resources, and without a change in the legislative statute, there’s no way to issue additional bonds,” Kling, who watched the Senate briefing, said after the meeting.
The state can borrow money to pay for construction projects through bond sales to investors, with the debt paid off with interest over several years. But Louisiana has a constitutional limit on debt, and the state is $22 million from hitting its $605 million debt ceiling, Phillips-Hymel told senators.
Kling said that leaves the state little capacity to issue new bonds to replenish the construction fund. He said the state could borrow enough money to cover about four additional months of construction work before hitting the debt cap.
The problem stems from state officials authorizing more construction spending than what they’ve actually funded through either upfront cash payments or borrowing, Kling said. He said over the past decade, Louisiana governors and lawmakers have given lines of credit to $1.6 billion more in projects than the state has sold bonds to pay for.
Among the options available, lawmakers in the upcoming regular session could seek to exclude certain types of debt from the calculation of the cap, change the limit or vote to breach the ceiling. Phillips-Hymel said each proposal would require a hefty two-thirds vote.
A limit enacted in the early 1990s requires that the state’s annual debt-repayment requirements fall under 6 percent of the state’s yearly income from taxes, licenses and fees. The state has never exceeded the limit, and Kling said lawmakers have never voted to spend above the cap.
A spokesman for Gov. Bobby Jindal’s Division of Administration wouldn’t say Thursday what the Republican governor will recommend to keep the dollars for construction work from running out. But Michael DiResto said the administration won’t seek a legislative vote to breach the debt cap.
“We will live within our means and we will look for opportunities to achieve savings so that capital outlay projects can continue to move forward,” DiResto said in a statement.
He also blamed Treasurer John Kennedy’s office, which oversees the Bond Commission, for offering past inaccurate guidance on borrowing limits.
“It’s important to note that the treasurer’s office previously advised that the state had more money to borrow than was actually available. They have recently corrected their calculations,” DiResto said.
Kling said the treasurer’s office didn’t miscalculate anything or provide incorrect information. He said the office delivered its annual report on state debt months ago, but since then, the state’s income estimates have fallen twice, which then dropped the debt ceiling by more than $50 million.
“Once you lower the revenue estimate, the debt capacity goes down. That’s not rocket science,” Kling said. “I didn’t think this was a blame game.”