It was an idea from one state treasurer that dominated budget negotiations for months only to be quietly sidelined earlier this year by the concerns of another state treasurer and likely will be resurrected by the person elected next state treasurer this fall.

Basically, House Speaker Taylor Barras was looking for a way to chip away at the seemingly annual revenue shortfall that amounts to about a third of the money available to pay the state’s everyday expenses. He turned to the state treasurer, then John N. Kennedy, to bounce off a few ideas and came away with what he says is a legal way to divert money from previously untouchable statutory dedications to help pay the state’s debt and thereby free some dollars to help pay the state’s bills.

State treasurers have no official role in making the state’s financial machine. But like the oil-stained mechanic below decks, they touch every cog and know how plans from the drawing board operate in the real world.

It’s an advisory function the candidates to replace Kennedy in the Oct. 14 election want to keep. A week of early voting begins Saturday.

For the past nine years, lawmakers have juggled a financial system that fails to raise enough revenues to pay the bills each year. They’re heading into another crisis when $1 billion in sales taxes, passed to bridge a previous deficit, expires on June 30.

Cutting a third of the state’s services would plunge the state into a Third World morass. Raising taxes is equally untenable.

Barras wanted something that would lower the deficit to a point that a combination of spending cuts and revenue enhancements wouldn’t be nearly as dramatic.

The Barras mechanism would take about 3 percent off the top of the monies for statutory dedications to help repay the state’s loans, about $400 million annually. Since debt payments are made out of the general operating fund, the maneuver would free about $97 million this fiscal year to pay other expenses.

Edwards’ Commissioner of Administration Jay Dardenne said initially he was intrigued. “We discussed this at length and we were very interested,” he said last week.

But as is often the case in governance, simple solutions don’t always hold up to the constant pounding of the government’s engine.

Dardenne said money from taxes, royalties and fees are deposited onto a metaphorical conveyor belt as deposited. Cash goes first into the Bond Security and Redemption Fund to repay debt — mostly loans for roads, bridges and buildings — until filled, then the money can be used for other purposes.

Statutory dedications are fees — think hunting licenses — imposed on people who use a service and the fees pay for that service. But that money doesn’t come in as predictably as taxes.

One of the big technicalities is how those dollars are accounted for once the $400 million pot is filled?

The idea was tried during the late 1980s under Gov. Buddy Roemer, but quickly abandoned because the mechanics were so difficult, Dardenne said.

Treasurer Ron Henson, who took over from Kennedy in January until the elections, focused more on the Wall Street reaction. The big New York investors underwrite the state’s loans and they wondered, anxiously, why Louisiana leaders were messing with the system that guarantees the loans are paid first.

“It’s not a totally bad idea, particularly in theory. There are some difficulties in implementation,” Henson said. He discussed those concerns with Barras and the matter was quietly dropped during the last legislative session.

But it’s not gone.

As late as Thursday, Barras said his idea will reemerge, though it’s not playing a role in the current negotiations with the governor.

“We’re working through the mechanics and technicalities,” Barras said. “We will address it again with the new treasurer.”


He may find allies among the candidates for state treasurer, at least among the three major Republicans.

“We have to follow the law,” said former state Rep. John Schroder, R-Covington. “The mechanics may be difficult with the current technology, but that shouldn’t be the reason you don’t follow the law.”

State Sen. Neil Riser, R-Columbia, said the state must pay down its debt.

“That’s most important. This has some technical issues that need to be worked out,” Riser said. “I am for whatever it takes to pay down our obligations.”

Former Commissioner of Administration Angele Davis, R-Baton Rouge, said she would review the plan carefully. “However, taxpayers should be assured that I won’t take any action, whether the Legislature likes it or not, that may put the state’s credit rating at further risk.”


Democratic candidate Derrick Edwards, of New Orleans, did not respond to queries seeking his input.

Follow Mark Ballard on Twitter, @MarkBallardCnb.