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Fiscal Cliff Not Out of Sight, Nor Out of Mind

Sue Lincoln

Only 344 more days till Louisiana reaches the edge of the fiscal cliff, yet most state legislators are following the “out-of-sight, out-of-mind” prescription. Not so for the administration, though, as the issue loomed large over Thursday’s State Bond Commission meeting.

The panel was considering how and when to issue bonds to pay for current state construction projects.

“Because of the fiscal cliff, if you put off raising all this money now and try and do it later, you’re probably going to have to sell at a time when there’s a lot of headlines, and investors are likely to penalize you for the uncertainty,” Louisiana’s financial advisor Renee Boicourt informed commission members.

She urged them to approve issuing $341-million in capital outlay bonds as soon as possible, but Representative Rick Edmonds of Baton Rouge had a question.

“Is there any advantage to us not drawing down the total capacity, he asked, reflecting the philosophy of many conservative House members who, during the spring legislative sessions, had espoused not spending all available revenue.

“You know, interest rates are moving up and so delaying this deal potentially puts it at risk of costing more,” Boicourt responded.  

She further cautioned that loss of over a billion dollars in state revenue when fiscal year 2019 starts next July first could mean the state will have to forego both borrowing and debt repayment.

“Under the assumption that there are no new revenues in ’19, the only way to make it work is you skip debt service altogether in Fiscal 19,” Boicourt warned.

“The reality is that if we don’t choose to do something next year because of the fiscal cliff, then we’re essentially shutting down the Capital Outlay program as we’ve known it in the past,” Commissioner of Administration Jay Dardenne added.

Later in the day, Governor John Bel Edwards emailed House Speaker Taylor Barras, and then made the text of the letter available to the press. It said, in part:

“I am asking you to re-examine the comprehensive plans that have been laid before the legislature and identify what, if any, you will support. If you remain unwilling to undertake comprehensive budget and tax reform, please identify your plan to solve the looming fiscal cliff.”