Louisiana has more wiggle room to borrow money next year for state-financed construction projects, a brightened forecast presented Thursday that replaced grim projections of a cash crunch so deep it threatened to stall nearly all projects.
Recent debt refinancing, along with better-than-expected terms for a recent bond sale has lessened borrowing constraints in the upcoming budget year that begins July 1, financial analysts told the State Bond Commission.
Treasurer Ron Henson described the improved projections as "a little breathing room."
Louisiana borrows money through bond sales to investors to pay for college building repairs, economic development projects, parish water system upgrades, roadwork and other items in the state construction budget. In exchange, the state repays the debt over decades with interest.
The state is limited by a debt cap, and has been hovering close to it — with previous concerns that it wouldn't be able to borrow money at all in the upcoming 2018-19 budget year under the traditional 20-year payoff structure the state uses.
Lela Folse, director of the Bond Commission, told the panel of legislative leaders, statewide elected officials and members of the governor's administration on Thursday that they won't face that worst-case-scenario problem.
Instead, Folse said the state could borrow an estimated $225 million next year under the regular debt structure.
That's not enough, however, to keep up with the planned list of construction work.
"We need to recognize that this is good news, but it's not time to celebrate just yet," said Commissioner of Administration Jay Dardenne, chief financial adviser to Gov. John Bel Edwards.
The borrowing constraint is a byproduct of Louisiana's ongoing budget and tax debate.
More than $1 billion in temporary state taxes, mainly sales taxes, expire when the next budget year begins. With less revenue on the books, the calculation of the borrowing capacity also is driven down.
Edwards wants lawmakers to consider raising taxes to fill the budget gap, but he's been unable to get legislative support for the idea so far, with House Republican leaders bottling up his previous proposals. Negotiations are continuing.
If lawmakers even replace a portion of the taxes, that would give Louisiana more borrowing capacity for projects.
Another option to bump up the capacity, according to a scenario presented by Folse, could involve the state delaying debt repayment and then back-loading the debt payoff. But such a bond sale would have the state paying about $15 million more in interest.