- Associated Press - Friday, July 11, 2014

BATON ROUGE, La. (AP) - Gov. Bobby Jindal took action Friday to curb the unintended consequences of a law that boosted the amount of borrowing the state can do before hitting its debt ceiling.

The Republican governor issued an executive order prohibiting new borrowing that would have been allowed solely because of the 2013 law. His order requires state debt to stay within the limit set before the law took effect.

“This executive order ensures that Louisiana maintains responsible fiscal policies that will allow the State to continue improving the economy and infrastructure,” Jindal’s order says.

At issue is legislation pushed by House fiscal conservatives last year to put more restrictions on how state government spends its money. After it was signed into law by Jindal, the attorney general’s office advised that in fact, it greatly increased the room for borrowing under the state’s debt cap.

A state financial adviser urged the Bond Commission last month to set guidelines on how it will manage the newly-available borrowing capacity, to give assurances to the agencies that set state credit ratings that Louisiana won’t go on a borrowing spree.

Treasurer John Kennedy, chairman of the Bond Commission, said the panel was planning to consider a policy similar to Jindal’s executive order at its meeting next week.

“I’m glad to see the governor is concerned about it. I share his concerns,” Kennedy said. “The rating agencies are nervous about it, and I don’t blame them.”

Jindal’s executive order runs through the current budget year, until June 30, 2015, giving the Legislature time to put new debt limitations into law.

Louisiana borrows money by selling bonds to investors to finance construction projects, like road work, building repairs and economic development initiatives. The debt is paid off with interest over decades.

The 2013 law requires the state’s income forecasting panel, the Revenue Estimating Conference, to estimate how much money is available for spending in a long list of set-aside funds that it didn’t previously forecast.

Louisiana’s debt ceiling, enacted in the early 1990s, requires that the state’s annual debt-repayment requirements amount to less than 6 percent of the conference forecast.

Since more money was swept into the forecast, the ceiling became 6 percent of a much larger pool of money. That means the state now has much more room to borrow.

State officials have said they didn’t intend to take advantage of the increased capacity, because the state doesn’t necessarily have more money to set aside for annual debt payments.

But Kennedy said the New York-based rating agencies were jittery because of the increased borrowing capacity, combined with a growing state debt load and continuing budget problems.

“We’re going up there next week to try to explain things to them,” he said.

Louisiana’s debt load has risen each of the last six years, a 30 percent increase since 2008, with the state hitting a record this year for how much debt it owes for each state resident.

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