Less than a week after Louisiana lawmakers came together to pass a painful budget that fails to fully fund the state’s obligations, agencies are already being put on alert to prepare for the next round of cuts.
Yes, that’s right, these cuts would be above and beyond what agencies have already been told they will receive in the coming fiscal year starting July 1.
Governor John Bel Edwards’ administration says that officially, it’s not a cut — not yet at least. But the various departments and agencies will be sent letters later this week asking them to set aside a percentage of their state funding allocation in the event that there is a mid-year shortfall next year as predicted.
“It’s not cutting, but we’re asking them to plan on not spending that percentage until we know later in the year if the funds will be freed up,” said Cody Wells, spokesman for the Division of Administration, the budgeting arm of the governor’s office.
The precaution has been handed down to soften the blow of potential mid-year cuts that could come later next fiscal year. Mid-year cuts, ones that arise outside of the regular annual budget cycle each summer, have become something of a state tradition. There have been mid-year cuts in seven of the past eight years. A mid-year cut is often more painful for agencies because they are unplanned for and have to be absorbed over a shorter period of time.
“In the past, when state agencies would expect mid-year cuts, the previous administration would continue on with business as usual,” said Richard Carbo, spokesman for the governor, referencing former Gov. Bobby Jindal. “But Gov. Edwards is committed to preparing for these cuts should the need arise as we continue to dig ourselves out of this budget crisis.”
The various state organizations will be notified on either Thursday or Friday of this week, and the percentage they will be asked to withhold will depend largely in part on what comes out of the Revenue Estimating Conference, a state panel that projects the state income. The REC projections will be released Thursday.
Wells confirmed this directive could also apply to the popular state scholarship program TOPS, which already was cut 30 percent for the upcoming school year. TOPS, which stands for the Taylor Opportunity Program for Students, has typically covered full tuition for in-state students who earn mid-level academic benchmarks. But this year, because of inadequate funding, students will be shorted 30 percent of the award.
Wells said he couldn’t elaborate on how much agencies would be expected to set aside, and he said it would differ among the agencies and departments.
By October it should be more clear whether the funds will be available to sue or else the cut will need to be enacted, he said.
Higher education officials said they were tentatively warned to expect to with hold about 5 percent as a precautionary measure. However, they stressed the amount was not yet set in stone.
Joseph Rallo, commissioner of higher education, said the Board of Regents will be approving the 2016-2017 budgets on Wednesday for the institutions based on the budget passed in the state Legislature. He said the institution leaders would be told to “take heed of the message, however they want to do it, and put aside 5 percent.”
Higher education has endured some of the deepest cuts in state funding of any other entity. It’s lost more than 55 percent of total state funds since 2008. At the conclusion of the Legislative session last week, it seemed higher education was spared, to some extent, as they emerged fully funded. But the latest announcement, means they will be preparing for yet another cut.
“Are we happy? Of course not?” Rallo said. “But are we blind sided by this? Of course not.”
Rallo noted that the writing was on the wall with recent announcements about a potential state deficit for the current fiscal year ending June 30.
In June, one of Louisiana’s top economists announced that the state was going to end this fiscal year with a $200 million deficit because of lower-than-expected corporate tax collections for the year.
The announcement came as legislators were already scrambling to fill what Edwards was calling a $600 million budget deficit for the next fiscal year.
But in the second special legislative session of the year which concluded Thursday, law makers raised $263 million — less than half of what Edwards called for. The resulting budget calls for cuts to K-12 schools, LSU medical schools in New Orleans and Shreveport, TOPS, state museums, prisons and judicial offices, among others.
After the Legislature passed its budget last week, Edwards gave a speech where he foreshadowed additional action to address the potential shortfall.
“In preparation for that, next week when the fiscal year starts and we had a budget authority to the agencies across the state of Louisiana, at my direction Jay Dardenne, Commissioner of Administration will direct them to take certain precautions to make sure that we have general fund on hand to meet that shortfall,” he said at last Thursday’s press conference.