BRADENTON, Fla. – Louisiana state lawmakers approved a budget amid renewed warnings that they still face an unresolved $1.2 billion shortfall in fiscal 2019.
Gov. John Bel Edwards said Friday that the total $33.04 billion spending plan for 2018 represents a “solid compromise” that funds critical state priorities.
“I do believe this was much harder than it needed to be and it certainly took longer than should have been necessary,” Edwards said, after legislators adjourned a special session to resolve differences between the chambers.
Edwards said the budget that takes effect July 1 is much like the one the House rejected during the regular session, when the chamber’s GOP members objected to spending all of the revenue the state’s economists expected to come in during the year.
The House wanted to hold back some revenue in case Louisiana encounters a mid-year shortfall, as it has in recent years.
Lawmakers ended up agreeing to appropriate an essentially flat total operating budget at $28.6 billion.
In a separate bill, they agreed on $3.84 billion of spending for capital outlay - $2.34 billion of which will be financed with state general obligation bonds.
While the final budget earmarks all anticipated revenues without any “gimmicks” or allocating one-time revenues for continuing expenditures, Edwards said it also contains an agreement proposed by his administration to adjust spending “so that we can respond to a mid-year shortfall should one arise.”
“This is a prudent budget. It is a conservative budget and I am proud of that,” Edwards said. “It’s not perfect, but the budget does about the best we can do to fund our critical priorities.”
Lawmakers ended their regular session June 8 without agreement on the budget, and subsequently went into a special session costing about $60,000 a day to resume negotiations on spending.
Because of the added expense, Edwards said Friday he will not call another special session about the fiscal cliff Louisiana will reach when more than $1 billion in temporary tax measures expire at the end of June 2018 unless top lawmakers agree in advance about measures to deal with the shortfall.
The House – which is the chamber where tax and revenue bills must be considered first in alternating years - refused during this year’s regular session to advance a series of bills intended to address Louisiana’s tax structure and budget imbalance.
The state’s revenue problems have developed amid a recession triggered by low oil prices and higher unemployment the past two years.
The inability of state officials to address the imbalance has led rating agencies to downgrade the state’s general obligation bond ratings by one notch.
S&P Global Ratings lowered the state's GOs to AA-minus from AA in March, and maintained a negative outlook.
Last year, Fitch Ratings downgraded the state to AA-minus from AA, and maintained a stable outlook, while Moody's Investors Service cut its GO ratings to Aa3 from Aa2, and assigned a negative outlook.
Louisiana is preparing for more volatility, even though revenue collections and employment showed a slight uptick earlier this year.
On Thursday, the State Bond Commission authorized staff to prepare advance paperwork in case there is a need to issue revenue anticipation notes during fiscal 2018.
“We don’t know yet if [RANs are] going to be needed,” said State Treasurer Ron Henson, who added that his office is still looking at cash-flow projections.
For the first time in decades, the bond commission last year issued $370 million of RANs due to a mismatch between revenue collections and spending needs. In previous years, the state depended on surplus held in the Treasury for cash flow but those funds dried up as they were used to support the budget.
On Thursday, the bond commission also voted to negotiate a new contract with Lamont Financial Services Corp., as the state’s financial advisor.
Commissioners ordered staff to “negotiate the best price to the state,” after noting that other proposals submitted to the state would have charged less than Lamont.
The state also received proposals for the FA slot from Montague DeRose and Associates LLC, PFM Financial Advisors LLC, and Public Resources Advisory Group Inc., according to state documents. An evaluation team ranked Lamont as the most qualified among the proposers. The firm has been the state’s financial advisor since August 2011.