A fiscal clash between state Treasurer John Kennedy and the Jindal administration kicked up another notch Monday.
In a new salvo, Kennedy warned that the administration continues to spend more revenues than are coming in. And he said it is worse than in past years.
“Mid-year budget cuts are not at all unrealistic at this point,” said Kennedy.
Through the first third of the state budget year — July through October — $925 million has been borrowed from treasury funds to pay bills. Last year at this point the number stood at $656.7 million and the year ended with a $141 million deficit comparing revenues to expenditures.
The administration claims a year-end surplus after counting newly-identified funds from prior fiscal years.
Commissioner of Administration Kristy Nichols said there would be a balanced budget at fiscal year end.
“Revenues fluctuate throughout the year and come in at different points. It is a $26 billion budget,” said Nichols in a statement.
Nichols said hiring and expenditure freezes have been put in place. “If we need to make additional reductions at the mid-year point, we will,” she said.
It is not unusual to do what is called “interfund borrowing” because there’s a heavier flow of revenues coming in later in the budget year.
But Kennedy said the stepped up pace in the current fiscal year is troublesome. “This is the worse shape we have been in by far” since fiscal year 2010, Kennedy said. In 2010, there was $181 million in borrowing, he said.
“It’s clear to me we are deficit spending,” said Kennedy. He noted that the state health agency reported last week its Medicaid spending was at a pace that could lead to a $171 million deficit.
In addition, Kennedy said “We have to have a 5.9 percent revenue growth this year to remain balanced.” He said it doesn’t look like the state will hit that target. The revenue forecast includes $97 a barrel oil and last week it was running $79, he said. He also said personal income taxes are lagging.
Kennedy said he agrees with Gov. Bobby Jindal’s recent expenditure freeze covering certain activities in state government and his prior employment freeze.
The bond rating agency, Fitch, stated the state’s financial situation in its latest analysis. “Fitch believes that it is clear that the state’s revenues in fiscal 2014 were insufficient to fund operations in that year and the state’s application of cash balance to solve the revenue shortfall lowers direct GF (general fund) cash resources and is likely, in Fitch’s opinion to contribute to increased interfund-borrowing in fiscal 2015.”