BATON ROUGE — A dollar figure for Louisiana’s budget deficit will be released next month, after the state’s financial analysts finish reconciling the accounting books.
Louisiana leaders expect the state spent more than it brought into the treasury in the budget year that ended June 30. Gov. John Bel Edwards’ administration says the gap could range from $200 million up to $300 million.
But the closing of the books on a state government budget year, with billions in income and spending, is complex.
The Revenue Estimating Conference — the state’s income forecasting panel — was told Tuesday the accounting work is still underway. A price tag for the deficit is expected to come at the Oct. 28 meeting of the joint House and Senate budget committee.
Why The Deficit?
Business tax collections are driving the deficit prediction, bringing in less than expected in the state’s official forecast.
Louisiana has struggled through repeated budget shortfalls in the last nine years amid the national recession, the oil price slump and the continued use by former Gov. Bobby Jindal and lawmakers of short-term fixes to close holes. Lawmakers, at Edwards’ urging, recently raised an estimated $1.5 billion in taxes to shrink cuts in this year’s spending plan.
LSU economist Jim Richardson, who sits on the four-member Revenue Estimating Conference, warned of the expected deficit when lawmakers were meeting in a legislative session on taxes. But the House balked at further tax hikes to fill a gap that wasn’t yet certain.
How Can The Deficit Be Closed?
Whatever gap exists has to be closed in the current 2016-17 budget year. Deficits can be closed with either new money or cuts.
Republican leaders in the House are hoping the tax hikes they recently passed will bring in more money than expected and could help offset last year’s deficit. But Louisiana’s share of response and recovery costs to the catastrophic mid-August flooding could heap new shortfalls on the state and erase gains that might show up in tax collections.
The Edwards administration asked agencies at the start of the current budget year on July 1 to lessen spending as a safeguard against likely cuts.
It also has renegotiated Jindal-era deals that privatized the services provided by the LSU charity hospitals and has identified a way to draw down more federal financing for the deals, which could help cut the state’s costs and shrink the budget gap.
Can The Rainy Day Fund Be Used?
Senate President John Alario, R-Westwego, said he’s looking at whether Louisiana can tap into its “rainy day” fund, which contains $359 million. But he’s not certain that the state will meet the constitutional triggers needed to be able to use up to $120 million of the fund.
“We’re looking at everything, if it’s constitutionally available to us,” Alario said Tuesday. But he added: “I’m not anticipating that we will be able to get to it.”