BATON ROUGE, LA - Louisiana will begin making pre-payments on a 2016 short-term budgetary loan next week, reducing the interest costs of the loan by $330,000, according to State Treasurer Ron Henson. Treasurer Henson joined House Speaker Taylor Barras and Commissioner of Administration Jay Dardenne today to announce the pre-payments.
The state will make its first loan pre-payment of $122.1 million on May 1 followed by two payments June 1 totaling $125.8 million and $122.1 million. Interest costs saved will total $109,962 in May and $223,053 in June.
"We always intended to pay the Revenue Anticipation Notes (RANs) off early if receipts came in as strong as expected for the months of April and May when the bulk of the state's revenue is received," said Treasurer Henson. "The reduction in interest costs made it worth it. Every little bit helps, and common-sense money management practices like these can help move the state's finances and budget in the right direction."
"With all of the financial challenges facing us, I am pleased that we will not only meet our obligations to repay the Revenue Anticipation Notes in a timely matter, but even earlier than required," said Senate President Alario. "The move will save taxpayers' dollars and show the national bond rating agencies that we keep our word."
"Anytime we can pay off debt early, it is a positive sign for the improving health of our cash position," said House Speaker Barras. "Saving interest costs while sending a positive message to our financial markets is significant for Louisiana."
"Although this does not help with our current budget problem, the cash flow of the state has improved enabling us to pay off the RANs early and save a little money in the process," Commissioner Dardenne said.
The state borrowed $370 million in RANs in the Fall of 2016 because of a cash flow and timing issue where revenues and expenditures were not matching up. Most state revenues are collected in the second half of the fiscal year, which can cause a cash flow crunch when payments and bills come due.
In prior years, state officials were able to draw down excess cash that was once available in the General Fund and other state funds to make payments. This excess cash is no longer available to use.
U.S. Bank and JPMorgan Chase issued the RANs to the state at an interest rate of 1.2 percent. Interest is payable monthly and payments were originally scheduled to be due beginning June 1 through August 1.