BATON ROUGE, La. (AP) – Louisiana is repaying early the $370 million it borrowed this budget year to keep state agencies paying their bills on time.
The early repayment will save the state $330,000 in interest costs. That’s a minor amount in a multibillion-dollar budget, but officials said Thursday it will send strong signals to Wall Street and credit agencies that Louisiana takes care of its debts even amid chronic financial troubles.
“As a banker I’m usually disappointed when people pay off their debt early. When I’m on the other side of the fence, this is great news when you pay off your debt early and save $300,000 in interest. Good sign for Louisiana,” said Republican House Speaker Taylor Barras.
The loan will be paid off in May and June, ahead of the August due date.
Commissioner of Administration Jay Dardenne, Gov. John Bel Edwards’ chief financial adviser, joked about holding a news conference to announce such a small savings, but said the state’s “hungry for any bit of good news” as it struggles with continued financial woes.
“This is good news even though in the big scheme of things it’s not a huge amount relative to our budget situation,” Dardenne said. “It’s symbolic in showing our fiscal responsibility to those who are watching us from afar, particularly those on Wall Street who look at our every move.”
Treasurer Ron Henson doesn’t expect a bump in the state’s credit rating – which has been downgraded over the last year – because the state paid off the loan early. Instead, Henson said the credit agencies will be watching and monitoring how the state handles its budget troubles and whether lawmakers enact permanent fixes.
About $1.3 billion in temporary taxes expire in mid-2018, and lawmakers haven’t decided how to address that fiscal cliff. The credit agencies have repeatedly cited instability in Louisiana’s finances as a chief concern.
Dardenne and Henson also acknowledged Louisiana may have to take out a similar, short-term loan again next year, though they sought to downplay its impact with credit agencies.
Before this budget year, Louisiana last took out a similar short-term loan nearly 30 years ago. Local government agencies regularly use them. The maneuver, state officials say, was needed because Louisiana has fewer reserves after years of budget raids.
Tax collections, fees and other payments to state coffers tend to be back-loaded, with most of them arriving in the second half of the state’s budget year. Until those payments roll into the treasury, the state usually borrows from its own savings accounts.
But former Gov. Bobby Jindal and lawmakers drained many of those accounts to patch together prior budgets, and that left the state with about $3 billion less in treasury reserves for short-term borrowing.
Dardenne said the Edwards administration is looking for ways to shrink upfront state expenses, such as restructuring how it pays the state’s safety net hospitals and clinics.
Follow Melinda Deslatte on Twitter at http://twitter.com/melindadeslatte