With cash reserves depleted, Louisiana is looking at loan proposals from private banks in order to pay its bills. It’s not unusual for the state to face discrepancies between revenue and costs at certain points in the year. In the past the state would resort to “interfund borrowing,” tapping various state funds and then paying itself back when revenues come in. But many of these funds no longer have cash on hand after “fund sweeps” became a common way for the Legislature to plug budget holes during Gov. Bobby Jindal’s administration. The cash crunch became even more pressing after the recent historic flooding. Julia O’Donoghue of NOLA.com/The Times-Picayune has the story:

Louisiana looks likely to have to take out a short-term loan to maintain the state’s cash flow. Most of Louisiana’s tax revenue arrives in the back half of the budget cycle, and the state  may not have enough money in its account to pay basic bills over the next few months. The government’s cash flow problem has been made worse by the massive flooding in the state. Louisiana has had to put up $50 million to respond to the disaster so far. At least three-quarters of that money will be reimbursed by the federal government eventually, but the state has to put up the money for now. “I think that it’s likely that we will [have to take out a loan] in substantial part because of the flooding,” said State Treasurer John Kennedy in an interview Tuesday (Aug. 30).

Shreveport medical school on “life support”

The public-private partnership that oversees LSU’s medical school in Shreveport has been a financial disaster, and LSU President King Alexander says the school could cease operations if things do not improve. As the Shreveport Times’ Leigh Guidry reports, the school got one of the lowest grades possible on a new financial grading scale.

The LSU Health Sciences Center in Shreveport received a score of 1 according to an “accountability model” used by the Ohio Department of Education since 2000, regents staff said. The 0-to-5 (poor-to-excellent) scoring system is part of a financial health analysis of Elevate Louisiana: The New Reality for Higher Education. The Elevate Louisiana initiative was adopted by the Board of Regents in December 2015 to “serve as the foundation for the future direction of Louisiana higher education,” according to the board. It called for the development and adoption of a policy on financial early warning systems and financial stress.

Fewer teachers, lower salaries

America’s K-12 schools have yet to recover from the Great Recession, with hundreds of thousands fewer teachers employed by districts across the country. Many of the teachers who remain face shrinking salaries due in part to state budget cuts. As Ben Casselman of FiveThirtyEight notes, these policy decisions could prevent high quality teachers from ever setting foot in a classroom:

The larger challenge for schools, however, may be longer-term: attracting teachers. Tight school budgets — and the broader pushback against public-sector payrolls in many states — have squeezed teacher salaries. Average weekly wages for public school teachers have dropped 5 percent over the last five years, according to a new analysis by the left-leaning Economic Policy Institute. Moreover, teacher salaries are falling further behind those of other professions that require a college degree; the trend holds up even after accounting for more generous public-sector benefits. The growing gap could have serious consequences: As my former colleague Hayley Munguia wrote last year, evidence shows that fewer top students are going into, or staying in, teaching.

Adding sales tax to services

A task force working on tax reform recommendations is looking at expanding the sales tax base to include services. By expanding the base, the rate could be reduced without losing revenue. Louisiana has one of the highest combined state and local sales tax rates in the country. Liz Farmer of Governing points out that powerful interests have successfully defeated past proposals to expand the sales tax base, leading to higher rates:

In 1987, the Florida Legislature expanded the sales tax to services such as advertising, legal, accounting and construction. The move was met with enormous outcry from powerful groups. Advertisers and the media joined with lawyers, realtors and homebuilders in fighting the new law. Major corporations like Coca-Cola and Procter & Gamble canceled or reduced their advertising in the state to protest the tax, while business groups canceled at least 60 conventions. Protesters even poured instant tea mix into Florida’s harbors, mimicking the famous Boston Tea Party revolt. After six months, the services tax was repealed and replaced with a sales tax hike from 5 percent to 6 percent, making the tax more regressive than before.

Number of the Day
17 – The percentage by which teachers’ salaries are lower than salaries of comparable workers in 2015. They were only 1.8 percent lower in 1994. (Source: Economic Policy Institute)