By State Treasurer John M. Schroder

One of my duties as State Treasurer is serving as Chairman of the State Bond Commission. The commission was statutorily created in the late 60s as a successor to the State Bond and Tax Board. It was granted constitutional status in 1974, along with the constitutional mandate that no debt can be issued in Louisiana without the commission’s approval.

There are 13 members who serve alongside me on the Bond Commission including the Governor, Lieutenant Governor, Secretary of State, Attorney General, President of the Senate, Speaker of the House and other members of the Legislature. Commission members come from a variety of backgrounds and expertise. While we may not always agree on a certain project or application, we discuss everything out in the open.

We hold a public meeting on the third Thursday of each month, and traditionally have met in Senate Committee Room A of the State Capitol. We post all of our meeting materials online including the financials and cost analysis for various projects. This transparency is extremely important to me, especially when we’re talking about state and local debt.

The Bond Commission staff is housed in the State Treasury and is comprised of nine professionals with extensive experience in budgeting, finance and debt analysis. Each month we receive applications from parishes, municipalities, special taxing districts and other entities that are requesting authority to incur debt or hold elections to levy taxes.

We review the applications for constitutional and statutory requirements and financial feasibility, including the ability to repay any debt. If an application is in order, it is placed on the agenda and considered by the commission for approval or disapproval. Most applications are due a month before they will be placed on the agenda for Bond Commission approval.

Even though the law requires the commission to give the OK before any public entity can borrow money or issue bonds, the state is not on the hook financially for the funding of local projects. Municipalities and other local units of government borrow the money from banks or investors and pay it back over time.

The state is on the hook for debt it issues in the form of state revenue bonds (Gas and Fuels Tax, State Highway Improvement, Unclaimed Property), General Obligation bonds, and other state-financed projects. These bonds are sold to investors, and the state uses the proceeds to fund each project. Taxpayers pay taxes and fees, such as a few pennies on each gallon of gas, in order to pay the investors back who bought the bonds.

There are three major Rating Agencies who assign ratings to state bonds. Moody’s, Standard & Poor’s and Fitch take the financial position and budgeting practices of the state into account when assigning a rating to state bonds. The next time our bonds will be rated will be after the state budget is enacted and the Legislature adjourns. This will be a good barometer of how the markets view the health of the state’s finances. Later this year, the state’s issuance of GARVEE bonds for highway projects will be rated on the basis of federal highway revenues.

Debt issuance doesn’t have to be a complicated process, and we’re here to help walk you through it. I encourage you to come to our next meeting, sign up to receive notices and visit our website for more information. To learn more about the Bond Commission’s work, visit www.latreasury.com and click Bond Commission.

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