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Latest Louisiana budget forecast holds steady, signaling shift toward stability

May 17, 2017
By Elizabeth Crisp
Originally Posted on The Advocate

Louisiana's budget forecasting panel got a rare bit of good news on Tuesday: The state's budget outlook has been relatively steady since its last quarterly review.

The update means state leaders don't have to immediately look to areas of the budget to cut before the fiscal year ends June 30. And the modest $24.7 million downturn in the budget that begins July 1 won't upend ongoing negotiations over the nearly $9.4 billion in state funding in the $29 billion spending plan.

House Appropriations Chairman Cameron Henry, R-Metairie, said a push from the House Republican leadership to only use 97.5 percent of the state's available revenues next year would allow the state budget-makers to absorb the shortfall without major changes to priorities that they have outlined.

The Senate Finance Committee is working on its own budget plan this week. Their draft will then be sent to the full Senate for consideration. The House and Senate will work together to hash out a final agreement ahead of the session's mandatory June 8 end date.

Louisiana has faced 15 mid-year budget shortfalls in the past nine years, meaning the revenues coming in often lagged behind what the Revenue Estimating Conference had projected.

Henry said that the estimating process isn't exact science, thus the idea behind budgeting under the projection.

The state House has agreed to a $29 billion spending plan for the coming year that would fully-fund TOPS scholarships but doesn't fund the state agencies that oversee health and social services to the levels that leaders say is needed to fund critical programs.

"It's not the fault of REC that they've been wrong so many times," he said.

The Revenue Estimating Conference includes House Speaker Taylor Barras, R-New Iberia; Senate President John Alario, R-Westwego; Commissioner of Administration Jay Dardenne, who represents the Governor's office; and LSU economist Jim Richardson. They are advised by a team of state economists.

"This is the first REC meeting since this REC has been seated (January 2016) that we got good news," Dardenne noted during the meeting.

The state has been in a recession largely driven by a weakened oil and gas industry.

The forecast downgrade for the coming year was driven partly by the shift in natural resources, lagging corporate and franchise taxes.

The House plan to budget 2.5 percent less than estimated, left about $236 million that Henry said could be used to plug unanticipated deficits. The state's average annual deficit for the past decade has been about $240 million, he said.

"That was the logic with how we came up with that ($236 million) number," Henry told the Senate Finance Committee on Tuesday.

State lawmakers on the House and Senate side have spent the early part of this week mulling bills that seek to structurally change the state spending, as well as tax proposals that aim to bring in new revenue.

More than $3 billion in the budget is tied to funds that are statutorily dedicated and have additional layers of protections from cuts. That has left health care and higher education particularly vulnerable when revenues don't meet projections, creating the need for cuts.

The Senate Finance panel on Monday mulled a bill that aimed to free up about $1 billion of that and send that money back through the normal budgeting process. It was backed by some of the state's most powerful lobbying arms: the pro-business Louisiana Association of Business and Industry and National Federation of Independent Businesses; the anti-tax Americans for Prosperity; the Public Affairs Research Council of Louisiana; Baton Rouge Area Chamber; and the state's higher ed leaders.

"There's very little of the money we can appropriate," said Sen. Sharon Hewitt, a Slidell Republican who had sponsored Senate Bill 226. She said that the money could come back to the currently funded groups, just with more legislative oversight.

But the statutory dedications go to far-ranging groups that have sought special protections. Those who voiced opposition included advocates for the deaf and blind, agriculture leaders and local tourism groups.

"Sometimes change is not easy, particularly if it's controversial," said Senate Finance Chair Eric LaFleur, D-Ville Platte. "If we don't have the discussion then we never make any progress."