Capital outlay projects exceed funds

By Justin DiCharia
Manship School News Service
BATON ROUGE — Louisiana is spending more money on capital outlay projects than it has the capacity to pay for without serial borrowing, a scenario one lawmaker called “a catastrophe.”
The latest projections from the State Bond Commission show most of the capital outlay projects will run out of money in July, then borrow more, and run out again in December, borrow once again only to see the coffers dry up in August 2017.
The Senate Wednesday unanimously passed House Bill 2 which funds capital outlay projects in Louisiana for the coming fiscal year. On Tuesday, the Senate added $450 million to the bill, most of it earmarked for new Priority 2 projects which qualify if they can find a financial partner by Nov. 1. Priority 1 projects are those already underway and which received funding in previous years. Priority 2 are either new to HB2 or are ongoing projects in need of additional money.
Constitutionally, the Bond Commission can only issue up to six percent of the state’s general and dedicated funds which set the current borrowing cap at around $435 million. The commission will reach this credit-card limit in August 2017 unless the Revenue Estimating Conference revises upward its forecasts. That, in turn, would increase the state’s borrowing capacity.
“We are borrowing more money than we’re paying back,” Rep. Jim Morris, R-Oil City, said in a House Ways and Means Committee Wednesday. “In the business world, my bank would call me and ask if I hit my head. I’m going to say that we are in extreme trouble. This capital outlay budget is a catastrophe”
The state borrows for capital projects through the issuance of public bonds. That obligation is in addition to the state’s overall $11 billion outstanding debt.
The newly added projects are as follows:
Lafayette Parish: $2 million added to the reconstruction of South Bernard Road from LA Hwy 182 to U.S. Hwy 90 (taken from the planning and construction of a three lane highway in Broussard).
Lincoln Parish: $500,000 cash line of credit given for elevator deficiencies.
Grant Parish: $455,000 cash line of credit given to the Grant Parish Natural Gas System Improvements funds.
Webster Parish: $45,000 cash line of credit given to Village of Doyline Wastewater Treatment Facility upgrades.
Webster Parish: $290,000 cash line of credit given to the City of Springhill recreational complex.
Rapides Parish: $1.3 million cash line of credit given to the New Town Industrial Park Infrastructure West side of Airfield.
Concordia Parish: $210,000 line of credit to the Emergency Water Ground Storage Tank replacement.
Ways and Means chairman Neil Abramson, D-New Orleans, said Senate amendments to his HB2 authorizes five times more projects than the state has in the bank.
During the hearing, Director of Facility Planning & Control Mark Moses prophesied he it would take several years before the number of projects in the capital outlay budget could be reduced to a financially manageable amount.
But Sen. J.P. Morell, who managed the bill on the Senate floor hours after the skeptical Ways and Means Committee adjourned, argued that the additional budget projects provides the state flexibility.
“Though I share some of the concerns of House members on the bill being over-appropriated, let’s begin with the fact that Gov. Edwards reduced HB2 by $1 billion dollars,” Morrell said, but just because a project is in in the bill does not mean it automatically gets funded if it isn’t ready to begin construction. “But if it isn’t included in the bill, it won’t get funded no matter what.”