(The Center Square) – Louisiana’s fiscal health before the coronavirus hit was dismal, and is likely to come out of the current financial crisis even worse, a new report says.
Louisiana’s elected officials have made repeated financial decisions that left the state with a debt burden of $21.6 billion, the report from Truth in Accounting (TIA) shows.
The state had $14.8 billion to pay $36.4 billion worth of bills, resulting in its $21.6 billion shortfall.
Louisiana ranked 40th out of 50 states for fiscal health and budget management, and earned a D grade in the analysis published TIA.
Using the state’s most recently audited financial report from fiscal year 2019, TIA calculates that every taxpayer in Louisiana would owe at least $17,100 to pay off the state’s debt, “for which they would receive no related services or benefits.”
Louisiana’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years, TIA notes. Of the $37.9 billion in retirement benefits promised, $9.8 billion in pension and $9.6 billion in retiree health care benefits remain unfunded.
Louisiana did not have enough money set aside to weather fluctuations in the market, the report states, let alone the economic impact resulting from state-mandated shutdowns ordered by Gov. John Bel Edwards since March meant to slow the spread of COVID-19.
According to rough estimates by TIA, Louisiana is projected to lose $7 billion in revenue as a result of the ongoing state shutdowns and subsequent economic crisis.
“The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but Louisiana’s overall debt will most likely increase,” the report states.
Only 11 states reported a taxpayer surplus at the end of the fiscal year 2019, the 11th annual Financial State of the State report found. The majority, 39 states, did not have enough money to pay their bills and were ill-prepared for any crisis, let alone economic free falls resulting from state coronavirus shutdowns.
TIA found that all 50 states combined reported more than $1.4 trillion worth of debt, including $855 billion in pension debt and $617 billion in other post-employment benefits debt.
According to the Louisiana Budget Project, Louisiana lawmakers are facing a $1.6 billion budget shortfall “that threatens the state’s ability to provide basic services like health care, education and public safety.”
This calculation only includes the difference between the recurring tax revenue the state expects to collect and the cost of continuing all current government operations in the upcoming fiscal year, including inflation. According to the state’s calculations, the budget shortfall for fiscal 2019 is $1.6 billion. By fiscal 2022, it is projected to reach nearly $1.9 billion.
Written by Center Square Contributor Bethany Blankley.