BRADENTON, Fla. - After a pickup in revenue collections, Louisiana will prepay revenue anticipation notes that were issued to provide budgetary cash flow.
Prepaying $370 million of RANs will save the state $330,000 in interest, according to State Treasurer Ron Henson, who made the announcement at a press conference Thursday with House Speaker Taylor Barras and Commissioner of Administration Jay Dardenne.
“We always intended to pay the revenue anticipation notes off early if receipts came in as strong as expected for the months of April and May, when the bulk of the state’s revenue is received,” Henson said. “The reduction in interest costs made it worth it...and common-sense money management practices like these can help move the state’s finances and budget in the right direction.”
The State Bond Commission approved issuing $400 million of RANs last fall, the first time in decades that the Treasury needed short-term financing for cash flow.
The borrowing was necessary because of lower-than-anticipated revenues and an imbalance in the state budget.
The notes were issued in a drawdown structure to be used by the state as needed. Treasury used $150 million in October, $120 million in November, and $100 million in December. Prepayments will occur on May 1 and June 1.
In previous years, the state used surplus revenue to support cash-flow needs, but that cushion dried up after being used to cure budget deficits.
The state’s cash shortage largely has been caused by disappointing state revenue collections, which have not met expectations despite lawmakers' approving $1.3 billion in temporary measures more than a year ago. They expire July 1, 2018, including a 1% sales tax increase.
Louisiana has experienced budget deficits every year since 2011 that required mid-year cuts and the use of reserves, as lawmakers resisted tax increases.
Democratic Gov. John Bel Edwards has pushed a number of tax reform measures before the Republican-led Legislature that are designed to haul in new revenue and cure the budget imbalance.
Lawmakers began a two-month session April 10, and have already killed the centerpiece of the governor’s tax reform package – a gross receipts tax on businesses that was expected to bring in more than $400 million.
The House Ways and Means Committee shelved the business tax bill on Tuesday. Others proposed by Edwards are pending review.
“The truth of the matter is the fate of that bill was decided a long time before we unveiled it, and that’s pretty sad because it is part, it is not the whole plan that we have, but it’s part of a comprehensive plan to address the cliff that hits us July 1 of next year,” Edwards said during a press conference the same day.
In addition to raising critical revenue for state operations, he said the gross receipts tax had to do with “restoring fairness” because 80% of Louisiana corporations pay no income taxes.
Edwards said the state budget is supported by a mix of revenues, including 39% from the state sales tax and 39% from individual income taxes, but only 3% from corporate income and franchise taxes.
“That is not a fair and balanced system,” he said.
Edwards said it is incumbent on the Legislature to offer its own tax reform measures, especially in the House where legislation dealing with revenues must start first.
The governor also said the two-month-long session should be enough time to work on tax bills, to avoid the need for another special session.