BATON ROUGE — Gov. John Bel Edwards and Louisiana’s lawmakers didn’t need to wait for Christmas to get the lump of coal in their stockings. They already knew about the financial headaches they’ll have to tackle in 2017.
Cuts still have to be made to rebalance this year’s more than $27 billion state operating budget, with the threat that a special legislative session may be needed to fill all the holes. Forecasts also suggest Louisiana likely won’t have enough money to continue all its existing programs and services in the next budget year.
Cuts On The Horizon
Louisiana’s newest budget gap is expected to be formally recognized in January, when the state’s income forecasting panel puts a dollar figure on a shortfall from the current 2016-17 fiscal year that began July 1. It will be the state’s 15th midyear budget gap in nine years, as some years have been so riddled with problems that financial holes emerged multiple times.
The latest shortfall is expected to reach around $300 million, as tax collections and other sources of state revenue continue to come in lower than projected amid a downslide in Louisiana’s economy and an unemployment rate that is third in the nation.
“I think our recovery’s likely going to be very slow,” said the Legislature’s chief economist, Greg Albrecht.
Against the wishes of the Edwards administration, the Revenue Estimating Conference delayed its official shrinking of the state’s income forecast until next month. When the downgrade happens, the governor and lawmakers will have to make budget rebalancing decisions within a month. That means deep budget cuts are likely coming in February.
“We’re going to be having very painful, difficult decisions,” said Commissioner of Administration Jay Dardenne, the governor’s chief budget adviser.
As always, health care services and public colleges are most at risk to cuts because they have the largest unprotected pools of state financing. Dardenne also said the Edwards administration will propose to tap into the state’s “rainy day” fund for $119 million to offset part of whatever shortfall emerges.
Cuts Already Made
Before the holidays, lawmakers reached a compromise with the governor to close a $313 million deficit left from the financial year that ended June 30.
The budget-rebalancing plan used savings from hiring and spending freezes and reshuffled available dollars to fill the gap. Most statewide elected officials were spared cuts, as were the transportation, prisons and tourism agencies. Reductions hit the education, veterans affairs and public safety departments, along with the governor’s executive department.
Nearly half the deficit was closed by postponing $152 million in payments to health providers that care for Medicaid patients until next year.
Louisiana’s colleges took one of the bigger hits, a $12 million cut, but it was less than originally proposed by the governor. Lawmakers successfully pushed to shrink the reduction, though colleges could again be on the chopping block in the next round of slashing.
Special Session Possible
When the Revenue Estimating Conference downgrades the state’s income projections for this year, the governor and the joint House and Senate budget committee have a monthlong window to rebalance the state’s spending plans. If they can’t reach a deal in that window of time, the missed deadline forces a special legislative session.
But even if lawmakers and the Edwards administration can agree on a plan, that doesn’t entirely rule out the possibility of a special session.
If the governor and the joint budget committee max out on cuts they’re allowed to make under the constitution and a gap remains, a special session would be required to finish rebalancing the budget.
Lawmakers on the House Appropriations Committee have asked agencies to draw up budget cut scenarios by mid-January, ranking their programs in order of importance and offering a list of proposed program and service eliminations.
