State officials agreed Thursday to borrow $100 million, allowing work to begin on a number of rural road projects.
However, problems with the state’s debt limit and a dwindling capital outlay fund are preventing the state from moving forward on the entire list.
State Treasurer John Kennedy, House Speaker Chuck Kleckley, R-Lake Charles, and Senate President John Alario will sit down with the Jindal administration and other state officials to develop a solution to the problem.
In the meantime, the state Bond Commission’s action Thursday will allow the Jindal administration to begin roadwork in multiple parishes, including resurfacing 6.8 miles of La. 413 in West Baton Rouge Parish and resurfacing 1.4 miles of La. 46 from the Yscloskey Bridge in St. Bernard Parish to the Mississippi River Gulf Outlet.
Other road repairs are on hold while the state grapples with a financial problem.
Because of slumping state revenue, the state is bumping against a debt ceiling that limits how much money can be borrowed. At the same time, a fund used to pay for construction projects is running a low balance.
Normally, the state would borrow money to replenish the Capital Outlay Escrow Fund. But that will be difficult to do while still ensuring that the state’s debt service — the price for borrowing money — does not exceed 6 percent of the taxes, licenses and fees in a fiscal year.
Due to a software glitch in the state Treasurer’s Office, the state was thought to only have $23.5 million in debt service capacity for the fiscal year that starts July 1. The state actually has $50 million in debt service capacity.
Even with an infusion of borrowing and the change in capacity, the Capital Outlay Escrow Fund — which holds the money for construction projects — will run dry in nine to 12 months, said Whit Kling, director of the state Bond Commission.
“We have a liquidity issue,” he told state officials. “It’s still liquid, but it’s getting close.”
The debt limit exists because the state was spending 15 percent of the state budget in the 1980s on debt service.
Alario, R-Westwego and the longest-serving member of the Legislature at 41 years, said good reforms were made.
The state is in difficulties now because of the faltering economy, he said.
“I don’t see this as a drastic, serious, 100 percent problem for the state. It is a problem,” Alario said.
State Rep. Jim Fannin, D-Jonesboro, complained that no one mentioned debt limit problems to him when he shepherded the rural roads plan through the Legislature last year.
The governor pitched the $325 million plan as a way to allow long-neglected rural roads, ineligible for federal aid, to get repairs.
“It’s not a pleasant situation to go through this process and come down to the last week and we don’t have the capacity,” Fannin said.
Kleckley said a long-term solution needs to be found.
Kennedy said the state can borrow enough money to ensure construction projects progress for several months.
“The immediate need is money in the Capital Outlay Escrow Fund. We have to proceed in an orderly fashion,” he said.