- Associated Press - Friday, May 16, 2014

BATON ROUGE, La. (AP) - Efforts to put more limits on how state government spends its money had an unintended consequence, boosting the amount of money the state can borrow each year under its debt ceiling.

The issue is tied to the complex way Louisiana calculates its cap on state debt.

A proposal pushed into law last year by fiscal conservatives in the House of Representatives 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.

Meanwhile, Louisiana’s debt ceiling, enacted in the early 1990s, requires that the state’s annual debt-repayment requirements fall under 6 percent of the annual Revenue Estimating Conference forecast.

Since more money was swept into the forecast, that’s 6 percent of a much larger pool of money, according to an opinion issued this week by the attorney general’s office.

And that means the state now has much more room to borrow under the ceiling.

The change removes ongoing concerns about breaching the ceiling, since the state had been hovering close to its annual limit recently. But Treasurer John Kennedy said that doesn’t mean Louisiana can afford to borrow more for construction projects each year.

“You’ll have more leeway,” Kennedy said Thursday. “It doesn’t mean we have the money to spend it.”

The increased capacity is an ironic byproduct of a new law that a group of House fiscal conservatives fought to put on the books as a way to have more certainty in Louisiana’s annual operating budget and more limits on the state’s spending.

The law requires the Revenue Estimating Conference to forecast the expected balances of hundreds of dedicated funds that receive dollars from fees, fines and other income sources.

Under the new law, lawmakers can’t spend more money than what’s recognized by the conference, and they are restricted in how they can spend dollars recognized as “one-time” money, not likely to reappear year after year.

In October, the nonpartisan Legislative Fiscal Office suggested the legal change could increase borrowing capacity under the debt limit.

Kennedy, whose office keeps track of the debt figures and limits, sought guidance from the attorney general about the implications of the new law. The opinion released to the public this week agreed with the fiscal office’s interpretation.

“I’m not sure this consequence was contemplated or intended, but it is logical,” Kennedy said. “Now, is it good policy? If you spend the money responsibly, it’s good policy.”

The fiscal office suggested the change could give the state as much as 25 percent more borrowing capacity each year.

For example, the fiscal office said if $2 billion in fund balances were newly included in the forecast, the state could spend another $120 million each year on bonds for construction work.

The exact increase in borrowing capacity hasn’t been determined. The treasurer’s office plans to present the figures next month to the State Bond Commission.

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