Louisiana's ugly budget outlook grows grimmer; state in ‘its own recession,’ economist says

Louisiana’s already grim budget outlook got even worse on Wednesday.

The panel that identifies the state’s projected income again lowered its expectations for the budget year that ends June 30, as well as the fiscal picture for the following year.

State legislators, who are gearing up for a budget-focused special session this weekend, will now have to come up with about $850 million in cuts to state services or new revenue to balance the current year’s budget and more than $2 billion for the budget that begins July 1.

“For all practical purposes, Louisiana is in its own recession,” said Greg Albrecht, the Legislature’s chief economist. “It’s come on pretty rapidly.”

The Legislature will begin grappling with the bleak budget outlook with just a third of the budget year remaining, so state agencies and higher education leaders have noted that any cuts will be even more pronounced over the next four months.

The Revenue Estimating Conference unanimously agreed that dips in corporate income and sales tax collections and falling oil and gas prices have been the major blows to the budget, and across the board, the tax collection outlook is sluggish.

“We’ve got weakness in the corporate sector, weakness in the personal income sector,” Albrecht said. “We’ve got weakness in the sales tax sector. We’ve got weakness in the mineral sector.”

The state is operating at a net negative on corporate income taxes — meaning it is paying out more in rebates than it is taking in as revenue.

“I’ve never seen corporate numbers this weak,” Albrecht said.

The formal projection from the Revenue Estimating Conference is that collections will fall about $542 million below what was projected when the budget was adopted.

On top of that, Gov. John Bel Edwards’ administration says former Gov. Bobby Jindal underfunded other programs, such as Medicaid, public schools and the Taylor Opportunity Program for Students, by another $300 million.

Edwards said he believes the real shortfall for the current year is likely to be about $943 million when other underfunded agencies are counted.

Edwards’ administration and Republican legislators have generally agreed that a mix of tax hikes and budget cuts will be necessary to solve the budget crisis.

“The question remains, ‘What is the exact combination to try to solve it?’ ” House Speaker Taylor Barras, R-New Iberia, said after the Revenue Estimating Conference meeting. “I’m assuming that there will be some shortfalls and some revenue-raising measures.”

Both are expected to be on the table during the special session that begins Sunday.

Edwards, in a meeting with editors from The Advocate on Wednesday, said he will present a proposal of $160 million in cuts first. Some of those cuts he can make on his own, he said, while others will need approval from the Joint Legislative Budget Committee or the full Legislature.

“We’re going to do all three,” he said.

His administration’s plan for closing the gap includes taking $128 million from the state’s “rainy day” reserves, redirecting $200 million in noncoastal oil spill settlement dollars and cutting funds that aren’t constitutionally protected.

Edwards, a Democrat, also has proposed several tax options, including a 1-cent sales tax hike and a 22-cent increase in the state cigarette tax, to address the immediate shortfall.

“It’s a parade of horribles if we don’t raise revenues,” he said.

Because the state budget is structured to constitutionally protect certain pockets of money, health care and higher education generally are seen as vulnerable when cuts are made.

Edwards said deep cuts to the state Medicaid program would cut into the offering of home hospice care for the terminally ill or dialysis treatments for kidney disease patients, while cuts to higher education could lead to students receiving unexpected bills this semester.

“We just can’t go there,” Edwards said.

Follow Elizabeth Crisp on Twitter, @elizabethcrisp. For more coverage of Louisiana state government and politics, follow our Politics blog at http://blogs.theadvocate.com/politicsblog .

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