Our Views: Quick action on shortfalls
It’s good news that Louisiana continues to get good reviews from financial ratings agencies, in part because good bond ratings lower the cost of borrowing.
The state is going to market with about $580 million in bonds for refinancing its existing debts. The Division of Administration said the good bond ratings mean that the savings might total $46 million over the life of the bonds.
The ratings reflect not only what Fitch Ratings called “sound financial management,” but Fitch also noted the state’s “prompt action to address projected shortfalls during the recent downturn.”
That’s not entirely good news, of course.
Often enough, with budget shortfalls, the state has cut into higher education and other essential services over the past few years under Gov. Bobby Jindal. But at least those financial problems were addressed quickly, the key point to the ratings agencies.
Members of the Legislature almost forgot that basic principle this year, when state tax collections dipped in the last few months of the current fiscal year. We suggested that the obvious solution was to use the “rainy day” fund to deal with the shortfall, as the Jindal administration proposed; there was simply not enough time left in the fiscal year ending June 30 to make cuts of more than $200 million.
Some members of the House suggested waiting until the close of the fiscal 2012 books, months down the road, before dealing with the shortfall. This would have been kicking a problem down the road, and we’re quite sure that financial watchdogs would not have approved.
The administration’s view prevailed on the fiscal 2012 issue, with lawmakers ultimately opting for $205 million in withdrawals from the rainy day fund.
So if it’s not good news that the budget had to be cut, from the standpoint of outsiders it’s better to deal with financial problems sooner rather than later.