The state’s revenue, meaning incoming cash, is around $7.1 billion year-to-date, which represents a 2 percent increase over the same period during the 2013-2014 fiscal year, according to the latest net receipts report that runs through the end of May.
While that’s a positive sign on paper, Treasurer John Kennedy said that the cash usually realized through severance taxes remains weak and there’s a noticeable downturn in corporate and franchise tax collections.
Looking further ahead, there have administration forecasts that predict budget shortfalls of $1 billion or more annually through the 2018-2019 fiscal year.
The Legislature and Gov. Bobby Jindal just addressed a $1.6 billion shortfall during the session that adjourned last month. Questions are still lingering in regard to the fixes — whether they’re permanent or if they simply set up the state for another deficit after the next crop of state officials are elected in the fall.
The state was already tiptoeing around the major rating agencies before session convened, and rightfully so. Tough questions were being asked about how the shortfall would be eliminated and the agencies wanted to know how structural deficiencies would be corrected.
Credit rating agencies have the authority to determine the state’s ability to pay back debt and make timely interest payments. Financially, they can sink a state with the stroke of a pen by making it more expensive to borrow money.
Now that the session has been adjourned, the rating agencies are back and Jindal, Kennedy and Commissioner of Administration Kristy Nichols have spent time in discussions with them over the past few weeks.
“We had always intended, with the rating agencies, to come back together with them once the budget was complete,” said Nichols. “There were goals they wanted to see accomplished and we did that, like cutting one-time revenue sources down by half and creating recurring revenue.”
Kennedy said he was surprised that he was not included in the very first calls with the administration and rating agencies, but he has offered his own take on the session to the agencies since then.
“I’m not going to talk about the Louisiana miracle and all that,” the treasurer said prior to one such call. “I’m going to try to keep them from downgrading us. I think it’s a 50-50 shot.”
Citing temporary fixes for the most recently completed budget year and other concerns, Moody’s Investors Service and Standard and Poor’s Rating Services both reclassified the state’s status in February from “stable” to “negative.”
The state should learn over the next few weeks whether its credit rating is lowered as a result of the recent regular session and the administration’s budget practices. Depending on what happens, it could be an early sign of what’s to come as a new governor and Legislature are sworn in in January.