Amid ongoing budget disputes, report shows Louisiana still $19.7B short on pension, retiree healthcare benefits

FILE - Louisiana State Capitol

As if closing a budget gap of a few hundred million dollars this year wasn’t hard enough, a recent report indicates that Louisiana’s state budget is actually $19.7 billion out of whack because of a failure to fully fund pension and retiree health care benefits.

That analysis from good government organization Truth in Accounting derives from a deep dive into publicly available state financial documents, the group’s CEO and founder, Sheila Weinberg, told Watchdog.org.

TIA gave Louisiana a “D” score in its report, saying the state was concealing from taxpayers the extent of its debt obligations.

“Louisiana’s elected officials have made repeated financial decisions that have left the state with a debt burden of $19.7 billion, according to the analysis,” TIA said in the report. “That burden equates to $15,500 for every state taxpayer.”

The report said that while Louisiana does accurately report all of its pension debt, about $2.6 billion in retiree health care debt can only be found through a deep dive into fiscal documents.

Weinberg also criticized Louisiana’s practice in calculating pension debts known as “deferred outflows.”

“If the pension assets report a loss, instead of reporting that whole loss in one year, they can amortize that loss over time,” she said. “So instead of reporting that pension loss, you know, loss in asset value in one year, they get to expense it over a five-year period. But then they have to do something with that loss. So what they do with that loss is they create this almost bogus, deferred outflows account, which is on the asset side of the balance sheet for the unamortized portion of that loss.”

To state Sen. Sharon Hewitt, R-Slidell, the TIA report shows that Louisiana still has a lot of work to do to establish itself as a fiscally responsible state.

“Debt related to pension benefits and retiree health care is creating a huge burden on state and local governments,” she told Watchdog.org. “And although we are making headway on reducing this debt, we must continue to remain disciplined in paying down our debt so we don’t transfer this burden to future generations.”

She did note that the recently announced budget surplus from the 2017-18 fiscal year will provide a good chunk of funds to devote to the pension deficit. The recent announcement of that surplus generated some controversy as some lawmakers questioned how there could be extra money left over from last year at the same time they were being told they had to raise sales taxes for 2018-19.

“Thankfully, the Louisiana Constitution does require us to appropriate 10 percent of any surplus funds at the end of a fiscal year to paying down pension debt,” Hewitt said. “In addition, 25 percent of a surplus must be deposited in the Rainy Day Fund. So in the case of the $300 million surplus expected when the 2018 books are finalized, roughly one-third of the surplus will be saved, or $100 million. The big debate will focus on whether to spend or save the remaining $200 million.”

Hewitt and Weinberg each argued that improved fiscal transparency was needed so that taxpayers can trust that what government tells them about its finances will turn out to be true.

“With these false claims of balanced budgets, it really hurts our democracy, because citizens are … going into a voting booth saying, ‘Oh, well, they balanced their budget. I assume everything is fine, so I’m going to vote to keep those guys in office,’” Weinberg said. “Where if they knew they really weren’t balancing their budget, would they have voted for somebody else?”

Dave Lemery is a regional news editor at Watchdog.org.
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