BRADENTON, Fla. – A grim picture of Louisiana's budget and borrowing trends has emerged midway through fiscal 2017, making it "inevitable" that lawmakers will meet to make required cuts.
The state's economists projected a general fund revenue shortfall between $308 million and $313 million at their revenue estimating conference on Friday, although the final number is still subject to minor adjustments.
"Because of the size of the deficit that we're facing today, I think it's basically inevitable that we're going to be in a special session," Jay Dardenne, administration commissioner, said at Friday's conference.
Dardenne also said that the administration plans to ask the Legislature to authorize using $119 million from the rainy day fund to cover a portion of the shortfall.
In addition to the revenue shortage, Louisiana has used interfund borrowing and draws from revenue anticipation notes to bolster the cash flow needs of the general fund, which has been in a negative position for the last few months, said Thomas Enright, executive counsel to State Treasurer Ron Henson.
The Department of the Treasury has borrowed $1.2 billion from accounts that receive revenues through statutory dedications through the end of December, he said.
Treasury is required to pay interest on the amount borrowed, he said. The interest amount is based on a six-month certificate of deposit rate, which has been 0.5%.
In addition to interfund borrowing, the state has drawn $370 million from revenue anticipation notes, according to Laura Lapeze, chief financial officer at Treasury.
Louisiana borrowed $400 million of RANs less than four months ago, in a deal split evenly between U.S. Bank and JPMorgan.
When the RAN transaction was approved by the State Bond Commission in September, officials projected that only $300 million would be drawn down.
The Joint Legislative Budget Committee is expected to meet Jan. 27 to adopt the revenue estimating conference's revised forecast and the shortfall amount, which will start the clock on the time that budget cuts must be made.
The committee will also discuss the advantages and disadvantages of using the rainy day fund to address a portion of the shortfall.
"Today's action by the revenue estimating conference clearly indicates the need for a special session," Gov. John Bel Edwards said in a statement Friday. "I have said all along that I am not willing to place the burden of this budget crisis only on the backs of our hardworking families, students or our most vulnerable citizens."
Edwards said the entire state budget must be opened to make the cuts or they will be concentrated in a few areas and "the impact would be too painful for our people to bear."
The governor can only order expenses reduced in the general fund and in accounts where revenues have been statutorily dedicated.