Louisiana again will have to correct the state’s operating budget midyear to account for fewer revenues than anticipated.
This time the collections of taxes — particularly corporate and severance — and royalties are coming in $370 million less than the forecast on which the spending plan for Fiscal Year 2016 was drafted. The Revenue Estimating Conference on Monday officially lowered the amount of money state government has to spend in its $25 billion annual operating budget that began July 1.
That’s on top of another $117 million deficit for the last fiscal year.
Commissioner of Administration Stafford Palmieri said the Jindal administration will address both shortfalls and balance the budget, as required by law, with a plan she hopes to release in the next couple days.
She said she would not discuss details until the plan is finalized. It will be presented to a joint House and Senate committee meeting on Friday.
“We’re going to protect critical services and maximize all revenues that we have,” Palmieri said.
Senate President John Alario, who chairs the four-member REC, said the state is about out of “smoke and mirrors” solutions. He felt that layoffs of state workers and cuts to the budgets of higher education can be avoided. He’s not as sure about spending for health care.
“I don’t think you can avoid any cuts,” Alario, R-Westwego, said.
In almost every one of his eight years as governor, Bobby Jindal, who is term limited and is running for president largely on his fiscal management prowess, has had to make cuts and juggle spending in the middle of a fiscal year.
Voters on Saturday are choosing a new governor.
Democrat John Bel Edwards or Republican David Vitter will be walking into a budget for the next fiscal year — the one that starts in about seven months — that had been $713 million out of whack. That number increased another $312 million by REC’s decision Monday. Neither candidate has articulated specifics about how they would address the state’s ongoing budget crisis.
The REC takes estimates from economists working for the administration and for the Legislature and then chooses one.
Both of the reports delivered Monday were very similar. The REC chose the slightly more conservative estimates calculated by Greg Albrecht, the economist for the Legislative Fiscal Office.
Collections of corporate income and franchise taxes are coming unexpectedly weak by about $201.4 million or $216.6 million, depending on the economic estimate.
“In order to make the forecast of $790 million, which is the current official forecast, we would have to collect close to $1 billion” for the remaining seven months of the fiscal year, said Manfredo Dix, the administration’s economist. “And I think it’s needless to say that I don’t think that’s going to happen.”
“That’s just a big shock to all of us that it would drop such a significant amount,” Alario said.
Part of the problem is the number of companies and individuals seeking to collect credits and rebates state government offered as incentives to reduce the amounts taxpayers paid. Some of tax breaks were partially rolled back earlier this year as the Legislature attempted to find ways to raise revenues to stave off dramatic cuts in spending.
“It does seem like there has been very much of a rush to get instruments filed,” Revenue Secretary Tim Barfield told the REC.
Because of the complexity of the tax laws and programs, his staffers are trying to determine just which credits are being turned in for refunds.
“It’s the thing that concerned me more than anything else about last session,” Senate Finance Committee Chairman Jack Donahue, R-Mandeville, said after the hearing.
Another major factor is the price of oil, which budget writers use to help calculate how much severance taxes, royalties and other revenues will be available for state government to spend. The price has fallen like a rock. Back in July the price used was $61.77 per barrel. On Monday the price was hovering at $42 per barrel.
REC members questioned how the economists could be so sure. Dix said they used the forecasts of a handful of agencies to determine the price to use in state budget calculations.
“Do you ever go back and see if those forecasts you’re using are accurate?” Richardson asked.
“We know the one we got right now is not,” Albrecht replied.
“We have a mineral revenue problem; obviously we have other problems as well. It’s not just mineral. I think the mineral revenue weakness bleeds into, to some extent, sales tax and income tax,” he added.
It wasn’t all bad; Louisiana consumers have been buying more vehicles and more gasoline, Albrecht said.
Income from gambling is slightly up. Albrecht said this was despite a drop in revenues from the land-based casino in New Orleans since the City Council banned smoking.
“There is a distinct step down in gross collections,” he said, except for July when New Orleans hosted a lot of conventions.
“This is the first time in a while that gaming revenues have surpassed oil and gas revenue,” Alario noted.
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