Louisiana may need to again take out a short-term loan for as much as a half-billion dollars to keep cash flowing to agencies and bills on track for payment.
The State Bond Commission, which oversees state borrowing, agreed without objection Thursday to move forward with the process for borrowing up to $500 million this budget year. But officials stressed they hope they can avoid the bank loan.
"I would couch this as a 'just in case' resolution," said Commissioner of Administration Jay Dardenne, Gov. John Bel Edwards' chief financial adviser. "We're hopeful we're not going to have to do this."
A final decision will be made in the coming weeks once agency cash flow projections are complete.
At issue is the timeline for when tax dollars, fees and other money sources are expected to flow into the treasury — and what agencies need each month to keep the lights on, write checks to workers and keep their programs operating.
Much of the state's revenue arrives later during the fiscal year. Until those payments roll into the treasury, the state usually borrows from its own savings accounts. But Louisiana has fewer cash reserves than it once had because former Gov. Bobby Jindal and legislators drained many of those accounts to patch together prior budgets, leaving less to help with cash flow.
Louisiana took out a similar short-term loan for $370 million in the last budget year that ended June 30, its first such borrowing in nearly 30 years.
Depending on how the cash-flow numbers look, Treasurer Ron Henson warned: "We think we might need to do this again."
Dardenne said the Edwards administration is working to shrink front-loaded state expenses. For example, the administration is trying to change the payment schedule to Louisiana's safety-net hospitals and clinics so they get paid monthly rather than in large sums early in the year.
The cash-flow loans — called Revenue Anticipation Notes — cost the state money in interest payments. Local governments regularly use the maneuver.
Louisiana officials aren't just worried about paying agencies' monthly operating expenses. They're also facing a looming cash crunch for state-financed construction projects like roadwork, college building repairs and economic development initiatives.
As the Bond Commission readies for a September bond sale to generate $341 million to finance construction work, the state's financial adviser warned a looming budget gap will drive down available money for projects.
Louisiana borrows money to pay for construction work through bond sales to investors that provide upfront cash. In exchange, the state repays the debt over years with interest. But Louisiana is capped in how much it can borrow each year based on how much income the state is projected to receive.
About $1.3 billion in temporary taxes expire in mid-2018. Without that revenue on the books, Louisiana's borrowing capacity is driven down — restricting how much Louisiana can borrow for construction work.
Edwards wants lawmakers to consider raising taxes to fill the gap, but he's been unable to get legislative support for the idea so far.