Louisiana budget shortfall at $70M for this year

BATON ROUGE — Even with the tax hikes recently passed by lawmakers, Louisiana has a budget gap of nearly $70 million that remains to be closed in the next three months, a worse-than-expected shortfall that puts colleges and health services back on the chopping block.

Gov. John Bel Edwards and lawmakers had thought the shortfall for the budget year that ends June 30 was about $20 million or more smaller. But last-minute changes that lawmakers made to sales tax bills in the frenetic final minutes of a recently-ended special legislative session lessened their impact for this financial year.

The disappointing update was delivered Wednesday to the state income forecasting panel, the Revenue Estimating Conference, which revised its forecasts to reflect the additional money expected from the tax increases.

Edwards’ chief financial adviser, Commissioner of Administration Jay Dardenne, said the governor will start levying cuts soon to rebalance the budget, though he didn’t provide a specific timeline.

“We want to do it as quickly as we can,” Dardenne said. “We want to give everybody as much time as possible.”

In the special session, lawmakers backed tax hikes on cigarettes and alcohol, a new tax on hotel rooms booked through Airbnb and a car rental tax. Business tax breaks were lessened. And lawmakers enacted a short-term, 1-cent state sales tax hike and removed some tax breaks on the state’s existing 4-cent sales tax.

The taxes are expected to bring in $300 million to fill gaps in this year’s budget and to drum up more than $1.2 billion for next year, according to data from the Legislature’s chief economist Greg Albrecht.

But it wasn’t enough to close all the holes. In addition to this year’s problem, Louisiana is short an estimated $750 million to continue all programs and services in the budget year that begins July 1.

House Republicans blocked many additional tax increases sought by the governor, a point noted in Edwards’ statement Wednesday about the latest budget estimates.

“Because the work was not completed in the special session, the cuts to critical state programs will be painful,” the governor said. “I will do everything within my power to minimize the burden this places on the people of Louisiana.”

The Edwards administration had hoped to spare public colleges and health services from additional reductions this year, but Dardenne said that’s unlikely with the larger-than-expected shortfall.

“We’re going to have to be looking to them to help make up that shortfall,” said Dardenne, a member of the Revenue Estimating Conference. “They are going to be having some additional cuts.”

The reductions will come on top of more than $160 million in cuts already made by the governor and lawmakers.

The Legislature can’t raise taxes in the current regular session, and talk has started about a possible second special session on taxes to try to stave off deep cuts for the financial year that begins July 1.

Senate President John Alario, R-Westwego, said another special session seems inevitable: “I don’t know how you avoid it at this point, but maybe some miracles come along.”