Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE

November 16, 2015

State's Interfund Borrowing to Pay Everyday Expenses At All-Time High; $345 million 'Surplus' Cash Spent This Year May Prompt More Borrowing

Each year, while the Louisiana Legislature is required to pass a balanced budget, it does not always know whether on any given day there will be enough cash in the state’s General Fund to support the state’s daily operations. Typically, the state collects more of its revenues towards the end of the fiscal year, but the state’s expenses come due throughout the year.

When the state’s General Fund does not have cash to pay the state’s bills, as is often the case in the fall of each year, state law allows the State Treasurer to dip into, or “borrow,” this money from 280 other smaller, designated funds to pay bills due right then. Typically, at any one time, the state has $2.5 to $3 billion available for such “interfund borrowing” from these other funds. The caveat is that the State Treasurer has to repay that money back into those smaller funds by August 15th each year – 45 days after the end of the fiscal year.

Now, a new report from the Legislative Auditor’s office says that this past fiscal year Louisiana borrowed at an all-time high from these various smaller designated funds to pay expenses that came up throughout the year.

Beyond that, the report says, by recognizing and spending a one-time “surplus” of $345 million of accumulated cash that for years had helped reduce interfund borrowing, the state created a permanent decrease in the cash balance for all future years. This will likely force more interfund borrowing to pay bills each year moving forward.

Of the $2.5 billion available across all of the state operating account’s funds in November 2014 to borrow to pay bills, the state had borrowed a historically-high total of $1.1 billion to make up for a cash flow deficit and pay expenses. That peak number prompted state officials to ask how bad the cash flow problem may become for the state.

Auditors found that, as of Oct. 30, 2015, the state’s interfund borrowing totaled $1.475 billion -- $491 million higher than last year. On Oct. 14, 2015, the state hit an even-higher peak of $1.8 billion in borrowing from these other designated funds to pay the state’s daily expenses.

“While this rise in borrowing is unlikely to result in significant cash flow problems for the state this year, legislators considering changes next year to taxes, tax credits, or exemptions will now have to carefully consider how those changes will affect the state’s cash flow,” state auditor Daryl Purpera said. “We will now want to ask: If we change the way we tax, how will that affect when during the fiscal year the state collects money or pays out expenses? Otherwise, at some point, the amount of borrowable cash sitting out there to pay bills over the course of the year may not be adequate to cover the amount of borrowing required.”

For more information contact:

Legislative Auditor
225.339.3800



###

Office of the Louisiana Legislative Auditor | www.LLA.La.gov