State Budget Practice Report Cards and Budget Resource Guide

Although it finished fiscal 2017 with a budget surplus, Louisiana dealt with a revenue shortfall during the year by moving money to its general fund from the rainy day fund and other special funds to pay for ongoing expenditures. The move was one of many budget maneuvers during fiscal 2016 through 2018 that left the state with a D average, the second-lowest grade possible, in the category.

Louisiana also used cash generated from a bond refinancing to cover operating costs in fiscal 2017, although less than it did in 2016. Further, $61 million in planned Medicaid spending deferred in 2016 was deferred again, to fiscal 2019. 

The state did poorly in legacy costs, as well, posting a D average for the three years studied. It had a pension funded ratio of 65.6 percent as of 2017, about three percentage points below the US total. It also fell short in funding other postemployment benefits (OPEB), primarily health care. In 2017, for instance, it funded less than a third of the actuarially determined contribution for OPEB.

In contrast to budget maneuvers and legacy costs, Louisiana’s reserve fund practices earned it an A average in that category. The state has clear policies governing the disbursement and replenishment of reserve fund dollars. For example, reserves cannot be tapped unless the official revenue forecast for the current year is less than the previous year’s revenues or if a deficit is projected because of a decrease in the official forecast. In addition, a two-thirds vote of the legislature is required to use the fund.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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