BATON ROUGE — A new Louisiana governor inherits a massive budget mess, a state struggling with years of red ink that his predecessor patched through rather than fixing. Now, government services are on the chopping block, threatened with hefty reductions.
Sound familiar?
That was the scene when Buddy Roemer took over as Louisiana’s governor in March 1988. And it’s the same landscape 28 years later, as Gov. John Bel Edwards, in office since January, readies for a special legislative session he called to try to repair the state’s seemingly never-ending financial morass.
As Edwards and lawmakers try to solve the budget problems and stabilize state finances, long-termers at the Louisiana Capitol repeatedly reference 1988. It’s the last time they remember the budget woes being so acute.
“It’s a shame that here we are, years later, going through the same mess,” said Robert Adley, chairman of the House budget committee during Roemer’s tenure and now an official with the Edwards administration.
AWASH IN RED INK
Edwards is grappling with an $850 million gap in this year’s $25 billion budget, which must be rebalanced by June 30. Next year’s shortfall is pegged at more than $2 billion. The Democratic governor’s proposing tax hikes to fill holes.
Figures get hazy as decades pass, but those around three decades ago peg the deficit Roemer inherited in the range of $800 million to $1 billion — in a budget that totaled only about $7.5 billion.
To top it off, the state had so little money in the bank, it had trouble paying its bills.
Companies started requiring Louisiana to pay when supplies were delivered. The state defaulted on lease payments and agencies were forced out of office space. Paychecks to state workers were slowed.
“There were meetings going on quite frequently about what bills can be paid when,” said Legislative Fiscal Officer John Carpenter, who led the House’s financial staff at the time.
Today’s financial difficulties haven’t reached those cash-flow troubles, but Treasurer John Kennedy has warned such problems loom if the budget isn’t stabilized.
WHAT THEY DID IN 1988
To steady the finances, Roemer and lawmakers unlocked protections given to some budget areas and transferred the money to the state general fund. Millions in new user fees were charged for services. Some taxes were boosted. Cuts were levied across agencies.
Motor vehicles offices, tourist centers and parks closed, according to a 1988 recap from the nonpartisan Public Affairs Research Council of Louisiana. Beds were reduced in the charity hospital system. Prisoners began doing janitorial work at the Louisiana Capitol.
“We had to do some very draconian things. I think we reduced headcount by about 7,000 people,” said Dennis Stine, a state lawmaker who became Roemer’s commissioner of administration.
To get money flowing to vendors and workers, Louisiana took out a $1 billion loan, repaid over eight years with existing state sales tax revenue. The Louisiana Recovery District was created as a shell taxing authority to get around a constitutional provision that bars the state from borrowing money to pay operating expenses.
HOW’D THIS HAPPEN?
Roemer, who was elected as a Democrat and later switched to the GOP, inherited troubles tied to the boom-and-bust oil cycles.
Republican Dave Treen pushed tax cuts when Louisiana was flush with oil money in the early 1980s. Oil prices collapsed, and Stine said Treen didn’t balance his last budgets, leaving those problems to his successor, Democrat Edwin Edwards, who successfully pushed tax increases but still struggled to close the gaps. He rolled deficits from year to year and inflated revenue forecasts, Stine said, leaving Roemer stuck with the massive gap.
During the Roemer era, a new system for forecasting state income projections was enacted. Budgets balanced all four years, Stine said, and Louisiana got credit rating upgrades after being at nearly junk bond status.
Legalized gambling was introduced — and taxed — for new revenue, and the state became less reliant on oil and gas.
REPEATING THE CYCLE
In 2002, Louisiana eliminated sales taxes on groceries and residential utilities in exchange for increased income taxes on middle- and upper-income earners, a tax swap recommended by economists to let Louisiana’s revenue grow with the economy.
“It helped up until the period of time when we started reversing it,” Carpenter said.
In the post-Hurricane Katrina recovery boom, governors and lawmakers rolled back the tax increases, costing Louisiana about $1 billion in lost yearly revenue.
Meanwhile, tax-break spending ballooned by hundreds of millions in Republican Bobby Jindal’s eight-year tenure alone, amid a national economic downturn.
Jindal used piecemeal financing to balance Louisiana’s budget, rather than raise taxes or cut government enough to match recurring tax revenue. An oil price slump worsened the problems.
And Louisiana finds itself again in the holes of 1988.
“History has repeated itself,” Stine said. “Maybe this is the year the Legislature and the governor will get its house in order. That’s the hope.”