Gov. Bobby Jindal’s plan to use $210 million in surplus and one-time money to help balance next year’s budget received the backing Thursday of the state Bond Commission, support needed for the maneuver to work.
The plan uses dollars that are limited in how they can be spent to pay off debt early. The pre-payment tactic frees up the same amount of unrestricted, state general fund money in the 2014-15 budget to spend on state operating expenses in the fiscal year that begins July 1.
It keeps the state in line with constitutional limitations on how surplus dollars can be spent and with hurdles added to the budget process for how piecemeal funding from items like drug settlements and fund balances can be used.
But the debt pre-payment only frees up the money for a year.
Treasurer John Kennedy, chairman of the Bond Commission, suggested the plan violates the spirit of controls designed to keep the state from facing annual budget shortfalls.
He said the proposal will create a hole a year later because the state will have another debt payment to make and the one-time and surplus dollars will be gone. Kennedy equated it to using a credit card to pay off a monthly bill that will only reappear a month later.
“What do we do next year? We’ll start off with a $200 million hole,” Kennedy said.
Lela Folse, director of the Bond Commission, said the state used a similar budget move in 2005, when Kathleen Blanco was governor.
“We have an attorney general’s opinion that says this is legal, and we’ve done this before,” Folse said.
Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, defended the plan, saying the Bond Commission didn’t object to similar budget-balancing maneuvers nine years ago. Kennedy was chairman of the commission at that time, as well.
Kennedy was the only Bond Commission member to vote against moving ahead with the debt pre-payment. Thirteen other members of the panel — including legislative leaders, Jindal administration officials, the Attorney General’s Office and the lieutenant governor — supported the governor’s plan.
The Bond Commission oversees state borrowing and debt. Its approval starts the work needed to make the early debt payment, a complex financial transaction. But lawmakers also must agree to spend the surplus and one-time money in that manner. Since many legislative leaders sit on the Bond Commission, Thursday’s vote was considered a signal that the plan will be approved by lawmakers.
The dollars for the debt pre-payment would include $173 million in state surpluses from past budget years and $37 million from patchwork sources like unused balances in state set-aside funds, savings expected from a new anti-tax fraud initiative and other items.