La.’s financial health

One of the country’s biggest disasters of this decade is another blow to Louisiana’s financial health, as households will struggle to recover and government revenues will face new pressures.

It’s not as though Louisiana’s state government had not been in trouble before.

The budget crisis left by outgoing Gov. Bobby Jindal overwhelmed the State Capitol earlier in the year, with three sessions of the Legislature convening in succession. Lawmakers were compelled to raise a number of taxes, including an emergency one-cent increase in sales taxes.

It wasn’t enough, as agencies were directed to cut more than $300 million from planned spending at the beginning of the fiscal year, July 1.

As tax revenues lagged expectations earlier in the year, the experts forecasted a shortfall in the fiscal year that ended June 30. Once those books are closed, some believe the state will owe another $200 million to balance its accounts.

Thus, new budget cuts are quite likely, just as the need for discretionary spending is greatest because of the August flooding.

There might be a temporary uptick in sales taxes, as people buy new refrigerators and other goods for their homes, but the economic impact of more than $8 billion — and counting — in property damage and the disruption of businesses large and small should not be underestimated.

The good news? So far, Wall Street is not turning on Louisiana.

After a $187 million bond sale for state construction projects, the state’s financial advisors and Treasurer John N. Kennedy said they were pleased at the interest rate received: “Because of the uncertainty with the flooding, housing and other losses, I really thought our rate would be higher,” Kennedy said after that meeting.

Uncertainty, though, is going to be chronic for a while.

Gov. John Bel Edwards and the state’s delegation in Congress secured presidential approval for the federal government to bear 90 percent of the disaster response costs, up from the typical 75 percent in disasters. That goes a long way for both state government and local bodies like cities and school boards.

But in every case, the local match for aid is going to cost the state. Louisiana is far from out of the woods, even if the high water has receded most places. “Somebody asked me, ‘What do you anticipate the price tag to be?’ I said, ‘God, I haven’t even gotten to that, the total,’” said House Speaker Taylor Barras, R-New Iberia, whose district received flood damage.

The Bond Commission met again Thursday to approve short-term borrowing of up to $400 million — a payday loan for state government.

The short-term bank loans will be drawn down as needed and must be repaid by August 2017. The governor’s representatives, Kennedy and legislative leaders all agreed to the borrowing.