Analysis: State budget picture to worsen

By MELINDA DESLATTE
Associated Press
BATON ROUGE — The depth of Louisiana’s budget problems gets a firmer number today, with lawmakers bracing for even worse news than the gaping $1.4 billion hole that already has them spooked.
The state’s income forecasting panel will take a look at the continued downward spiral of oil prices and adjust Louisiana’s revenue forecast to account for the drop. Little good news is expected from the meeting of the Revenue Estimating Conference.
Fear already is evident, among lawmakers worried about steep reductions to public colleges and health care services and among agency leaders warned of the likely slashing to their budgets.
Before today’s actions of the four-member Revenue Estimating Conference, the state faced a shortfall pegged at $1.4 billion for the 2015-16 year that begins July 1. That’s likely to grow, and lawmakers are describing the budget gap as one of the worst they’ve ever seen.
To balance next year’s budget, Gov. Bobby Jindal’s administration is considering cuts of $250 million to health care services, which could grow to as much as $1 billion when federal Medicaid matching dollars are lost.
The administration also is weighing the possibility of slashing more than $300 million from public college spending. Higher education officials are warning the cuts could be devastating to campuses, and lawmakers say such a reduction could wreck state workforce development efforts.
Other state agencies were told to draw up scenarios for shrinking their state financing by 15 percent next year.
And those were the figures floated before the Revenue Estimating Conference — comprised of the governor’s chief budget adviser, the Senate president, the House speaker and an independent LSU economist — lowers its forecasts any further.
Jindal has until Feb. 27 to craft his 2015-16 budget recommendations. Lawmakers will work on a final version of next year’s spending plans in the two-month legislative session that begins April 13.
In an interview with Fox News’ Neil Cavuto, Jindal described next year’s shortfall as “based on falling oil prices” and seemed to downplay the scope of the state’s budget problems.
“Falling oil prices are great for consumers. I’d much rather have our consumers have more money in their pockets even if it means less revenue for government,” said the Republican governor and possible presidential candidate.
About 13 percent of Louisiana’s state general fund this year is tied to severance taxes and mineral royalties from energy production. For every dollar drop in the annual oil price for income projections, that’s about a $12 million hit to the state general fund.
But despite Jindal’s claims, plunging per barrel oil prices aren’t Louisiana’s biggest budget trouble.
Louisiana has struggled through repeated financial gaps since 2008. The state treasury has taken hefty hits from the national recession combined with sizable tax cuts approved by Jindal and his predecessor when the state’s finances were flush.
Jindal has refused to raise taxes. But rather than match state expenses to annual revenue, he and lawmakers have turned to property sales, legal settlements, fund balances and other one-time sources of cash to fill gaps.
That leaves new shortfalls to fill every year. About $1 billion of next year’s hole is tied to piecemeal financing that was plugged into this year’s budget and won’t be available next year.
The plunge in oil prices has exacerbated the problems but not created them.
If the Revenue Estimating Conference downgrades this year’s forecast, the Jindal administration and lawmakers will have another midyear deficit to close with five months remaining in the fiscal year.
They’ve already had to rebalance this year’s $25 billion budget when a $170 million deficit appeared. Cuts were modest to fill that gap, because patchwork financing helped offset the problem. It’s not clear if a second deficit could be closed with as little pain. If it is, that would use up financial resources that could have helped with next year’s shortfall.
The Jindal administration has given state departments target figures for possible cuts they may have to make quickly to eliminate any deficit for this year. And that’s before those agencies even get to next year, when more cuts are on the horizon.
Melinda Deslatte covers the Louisiana Capitol for The Associated Press.