BATON ROUGE, La. (AP) — Louisiana's borrowing decisions during former Gov. Bobby Jindal's administration will cost the state millions in extra interest payments over decades, according to an audit released Monday.
Legislative Auditor Daryl Purpera's office says the debt payment maneuvers used since the 2010-11 budget year helped get quick cash for the state budget but came with a price tag for Louisiana. The long-term cost to the state for the maneuvers could reach as high as $231 million, auditors estimate.
"These practices have also pushed the state closer to its debt limit, which will limit the state's borrowing capacity for (construction) projects in the near future and increases the risk that the state's credit rating will be downgraded by ratings agencies," the audit says.
The report says Louisiana used a type of borrowing in which it got extra money upfront by agreeing to pay higher interest rates over the life of the debt. Purpera's office says that will cost the state an additional $71 million in interest over 20 years.
In addition, the Jindal administration and lawmakers used $335 million in surplus and other dollars that could be spent in limited ways to pay off debt early in the 2014-15 and 2015-16 state fiscal years.
The pre-payment tactic freed up the same amount of unrestricted, state general fund money in the annual budget to spend on operating expenses, to avoid cuts to government programs and services.
But Purpera's office says if the state had instead used that money to pay for construction projects, it could have saved $160 million in interest payments on long-term debt. Also, if the debt pre-payments had been structured differently, the state could have saved $95 million on future debt payments while still having more money for the state's budget, the audit says.
Meanwhile, state officials approved more construction projects than the state has money to cover. Gov. John Bel Edwards' administration — in office since January — inherited a $3.7 billion backlog of approved construction work, leaving the state with a reduced capacity for new projects through 2024, the report says.
The findings came in a performance review of the State Bond Commission, which oversees Louisiana's borrowing activities.
Treasurer John Kennedy, chairman of the Bond Commission, agreed with the information included in the audit. But in a written response, Kennedy noted many of the borrowing maneuvers at issue were made by the Jindal administration and backed by lawmakers who make spending and budget decisions.