BRADENTON, Fla. - Louisiana’s budget is so tight that reducing the size of the state’s upcoming bond issue will save a few million dollars for the general fund, the State Bond Commission learned Thursday.
The state is preparing to issue $203.32 million of general obligation bonds to pay for capital outlay expenses, a reduced amount from the $275 million first considered last month.
The SBC delayed consideration of the larger borrowing to take a closer look at the projects being funded.
The bond resolution for the smaller deal was approved Thursday, with board member Jay Dardenne commenting on the positive benefit it will have on the $16 billion general fund budget.
“We do wind up saving I think a little over $3 million that is going to be available in the general fund spending process that otherwise wouldn’t be available,” said Dardenne, the administration commissioner. “So the delay of a month resulted in that consequence, that favorable consequence.”
The next step will be getting ratings for the deal. Pricing is expected around March 22.
The SBC deal approval comes amid a special legislative session called to deal with a $304 million mid-year budget gap due to lower-than-projected state revenues.
Louisiana also had to take $314 million of fiscal 2017 revenues to cure a deficit discovered when the 2016 books were closed.
Lawmakers, who are in session through Wednesday, are considering a number of methods to cut the budget and to blunt the amount of cuts by dipping into the Rainy Day Fund.
One proposal filed by House Speaker Taylor Barras, R-New Iberia, would direct the state treasurer to make changes in the way debt service is paid, with the ultimate goal of lessening pressure on the discretionary portion of the general fund.
All state general fund revenues that are collected, including discretionary funds and those subject to statutory dedications, flow first into the Bond Security and Redemption Fund.
The system has been credited with strengthening the state’s bond ratings, as it assures the payment of debt service before the state pays other bills.
House Concurrent Resolution No. 1 says that the state typically pays debt service of between $350 million and $400 million from the discretionary amounts in the general fund.
Agencies that receive revenues from statutorily dedicated funds “have not shared in the allocation of the payment of debt service,” the resolution said.
By including revenues from the dedicated funds, the resolution said that $96 million would be available for debt service – freeing up a like amount for discretionary general fund spending.
Barras’ idea was considered last year when the state faced another shortage, but it was rejected over concerns about the potential impact to the state’s bond ratings and the agencies that received dedicated funding.