BRADENTON, Fla. - Louisiana Treasurer John Kennedy claims the state repaid a loan from future collections, and described the practice as similar to "check kiting."
Kennedy said the state ended the 2014 fiscal year on June 30 with a $63 million deficit in its Overcollections Fund, which supports budget priorities such as higher education. The fund consists of contingent and other one-time sources of revenues.
He also said that the Division of Administration took out a $70 million loan in 2014 to fund higher education cash flow needs, and that loan is being repaid with money appropriated by the Legislature in fiscal year 2015.
The loan caused the state to start the July 1, 2015 fiscal year with a $63 million hole, Kennedy charged.
"The Overcollections Fund has turned out to be an 'Undercollections Fund,'" he said in a release. "I'm very troubled by the ongoing budgeting and cash flow problems the state is experiencing.
"The use of contingency funding to support higher education is not fiscally responsible or sound education policy," Kennedy added. "In the banking business, they call this check kiting."
As a result of the maneuver, he also said that agencies could face a shortfall when they come to the Treasury for their funds in fiscal 2015, and it could require a new loan.
Commissioner of Administration Kristy Nichols told the News Star in Monroe that the problem was overstated.
"First of all, we absolutely will not enter fiscal year 2015 in a deficit," she said. "The reality is that the books don't close until Aug. 14. We anticipate receiving expected funds by the close of the year."
Nichols said that the state expects to receive $13 million from the Department of Revenue's fraud initiative and reimbursements from the Federal Emergency Management Agency as well as $12 million from agency budget reversions and sweeps that occur before closing.
"Basically, Treasurer Kennedy is looking at a snapshot on a particular day without knowledge of the big picture," Nichols told the newspaper.
Kennedy said: "We need to fix the state budget, stop spending more taxpayer money than we take in and get serious about stabilizing the funding for our critical priorities such as higher education."
The state's ratings have not been affected by the use of loans, though analysts have expressed concern about multiple years of pressured financial operations.
While the state has a "strong financial and budget management framework," audits for five fiscal years through 2013 showed general fund deficits as well as low available general fund operating reserves, Standard & Poor's said in March while affirming the state's AA rating and stable outlook on $3.5 billion in general obligation debt.
S&P also said Louisiana has below-average pension and other post-employment benefit funded ratios because the state has not met its annual required contribution for pension funding for four consecutive fiscal years.
The state's four public employee defined benefit retirement plans had a combined funded ratio of 58% in 2013, and an unfunded liability of $19 billion. The OPEB health care plan and life insurance program had an unfunded liability of $5.4 billion in 2012.
"While Louisiana's historical dependency on the energy sector and cyclical oil and gas prices has caused fluctuation in key revenue sources, and recent budgets have included one-time revenue to bridge gaps, in our view state officials demonstrate a commitment to make timely expenditure adjustments to address structural imbalances on a budgetary basis," said S&P analyst Sussan Corson.
The state's GO bonds are rated AA, by Fitch Ratings and Aa2 by Moody's Investors Service. Outlooks are stable.
Both raters expressed concern about revenue under-performance and the use of budgeting for recurring programs with one-time resources but said the state has been quick to make cuts when necessary.
