An Attorney General’s opinion says it is fine for the state to use money from the Rainy Day Trust Fund two years in a row and even twice in one year.

Whether it’s legal or not, the state should not tap the Fund again this year or next, because the people of Louisiana voted for it for emergencies only.

If the state declares an emergency too often, something is fundamentally wrong with its budgeting process.

Tapping into the Fund too often could hurt Louisiana’s bond rating, causing taxpayers to have to shell out more money for state projects. Although the state has worked hard to improve its bond rating, Louisiana is still last in the country. Lowering the state’s bond rating by just one notch could cost taxpayers roughly $7.5 million in interest payments on a $200 million bond issue.

To better understand this, take an individual’s credit rating, for example. When a person has bad credit, he or she has a harder time borrowing money, has higher interest rates on credit cards and loans, and ultimately pays more money for a longer period of time on debt. It is the same with the state’s bond rating. When the state’s bond rating is poor, it ultimately costs taxpayers more money to pay for necessary projects like new schools, roads and other improvements.

Do taxpayers really want Louisiana’s bond rating to take a step backward just so the state can put a Band-Aid on its budget problems? We can’t afford to drive up the cost of borrowing money because it’s convenient.

Just because it’s legal doesn’t mean it’s right.

The Rainy Day Fund was created with the understanding that it would be tapped no more often than every other year, and then only for emergencies-period. I encourage the Legislature to pass a constitutional amendment that would limit access to the Fund to reflect that.

John Kennedy
State Treasurer and
State Bond Commission Chairman