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Louisiana's construction budget worries lessen

Melinda Deslatte, Associated Press

BATON ROUGE, La. (AP) -- Months after Louisiana's construction budget got so tight that some projects appeared threatened with shutdown, state officials have been helped by brightened revenue forecasts and low interest rates.

Now, the state is on track to keep construction dollars flowing for college building repairs, economic development projects and state-funded road work. A new bond sale is on the horizon. Worries about breaching the state's constitutional limit on debt have lessened.

"We're in good shape based on the forecast for the future. We have our economy improving. We've got sufficient cash flow today, and we'll have sufficient cash flow tomorrow," said Commissioner of Administration Kristy Nichols, the governor's top budget adviser.

At the start of the year, Louisiana was teetering so close to its debt cap that Treasurer John Kennedy said the state's pool of money to pay for ongoing construction projects was running dry and there was little room to borrow more.

Nichols said the situation never was as dire as it had been described.

But both the treasurer's office and Gov. Bobby Jindal's administration agreed this week that the state has the wiggle room to borrow again, to replenish the construction fund.

Kennedy, however, framed it as an improved situation, but one that will keep the state hovering near its debt cap for years.

"We're better, but we're not well. We're still hugging the debt limit," he said.

The state borrows money to pay for construction projects through bond sales to investors, with the debt paid off with interest over decades.

Nichols said without more borrowing, the money to pay for general construction projects will run out by January's end, and the state transportation department's road work fund will run dry after March.

The funding crunch stemmed from lawmakers and governors approving more than $1 billion more in lines of credit for construction work over the past decade than they had borrowed or appropriated money to pay for. Worsening the problem, stagnated state income and the economic downturn kept the debt cap lower than expected, limiting borrowing.

A state revenue uptick has been the chief driver in improving the situation.

Louisiana's debt ceiling, enacted in the early 1990s, requires that the state's annual debt-repayment requirements fall under 6 percent of the state's yearly income from taxes, licenses and fees.

Improved income projections give the state more room under the cap to borrow. In addition, officials refinanced some state debt, taking advantage of lower interest rates to lessen how much the state will owe each year.

The state's financial advisers worked out a proposed, multiyear borrowing schedule that would keep Louisiana below its debt cap while providing a new infusion of cash for projects. New borrowing must be approved by the Bond Commission, which could consider proposals by next month.

Nichols said the administration is hoping for a November bond sale, to generate $500 million, and then another $300 million bond sale in the spring. Borrowing for a rural road program also would be planned for the spring, she said.

But the borrowing proposal will have the state close to its debt limit for years, and the slightest downturn in revenue collections could restart worries about running out of construction cash.

"If there's a blip on the revenue side, you have a problem," said Whit Kling, director of the Bond Commission.

Nichols said the borrowing plans are conservative and adjustable if there are any dips in the debt ceiling.

"We've been overly conservative, overly cautious in the way we built the models. In addition to that, our economy continues to grow," she said.