For years, the Louisiana Legislature has authorized spending more money than the state winds up taking in.
The result: dreaded midyear budget cuts, year after year.
State Sen. Jim Fannin believes he has a solution, and it has the support of Gov. John Bel Edwards.
Fannin’s measure would force legislators to budget less than the full amount of revenue projected to come in each year.
His proposal would create a cushion in case taxes generate less money than expected or if a natural disaster requires more spending.
Under Fannin’s bill, the Legislature could not pass a budget that would spend more than 98 percent of the revenue forecast by the state Revenue Estimating Conference, a four-member board created in the late 1980s to control spending.
“Everybody down there wants to spend, and they want to spend according to the forecast,” said Fannin, a Republican from the north Louisiana town of Jonesboro.
Next year’s projected budget of spending from state taxes and tuition payments is $9.5 billion, so his proposal would force the Legislature to spend about $200 million less than that amount.
For perspective, that’s a little more than Louisiana spends on the TOPS scholarship program, and it’s roughly equivalent to the amount the state typically spends on tax incentives for film production.
Fannin said he will introduce the measure when the Legislature convenes next month for a 60-day session devoted primarily to the budget and taxes.
To his surprise, the state’s Democratic governor favors it.
“The governor is supportive of this idea because we want to make sure we’re good stewards of the public’s money,” said Kimberly Robinson, who heads the Revenue Department. “If we have unforeseen incidents such as hurricanes, tornadoes or floods that require state government to spend extra resources, the unspent money will be available.”
Robinson, the governor’s point person on tax policy, said any money unspent by year’s end could go into the state’s rainy day fund or to pay down state debt.
However, she cautioned that the proposal would not take effect immediately, given the state’s budget problems.
Fannin chaired the House Budget Committee under Gov. Bobby Jindal and said he suggested the spending limit to the Governor’s Office then, but it sparked little interest. He said he mentioned it to Edwards during this year’s special session and got a favorable response. But he has yet to outline the plan to legislative leaders.
Conservatives complain that Edwards likes to spend too much money. But as a state representative, Edwards frequently worked with the “fiscal hawks” — a group of conservative-minded House members — to try to prevent Jindal from using gimmicks to balance the state budget.
Fannin’s proposal is an effort to stop the midyear budget cuts that have occurred almost every year during the last decade. When revenue turns out to be less than predicted, legislators and the administration must either slash money for programs already underway or shuffle funds around to balance the budget.
“Every agency tells us that it’s difficult to deal with midyear budget cuts,” Fannin said. “They say, ‘Cut us on the front end, not in the middle of the year.’ ”
Edwards called the Legislature into session in February to close the latest midyear budget shortfall, which amounted to $304 million. He and lawmakers made up the difference by cutting spending, tapping the state’s rainy-day fund and finding new revenue.
Louisiana’s constitution requires the state to run a balanced budget, unlike the federal government, which can operate with deficits.
Jim Richardson, an LSU economist who has sat on the Revenue Estimating Conference since its inception, praised Fannin’s proposal but noted the political difficulties with it.
“You can probably find everyone to say it’s a good idea on the left and the right,” Richardson said in an interview. “But in the first year, we’d have to incur some pain with taxes that are a little higher or else we spend a little less.”
Fannin noted that legislators will face political pain even if they approve the “standstill budget” proposed by Edwards for next year.
In that scenario, the state would spend no more next year than this year, meaning spending on salaries of government employees, K-12 schools and other government services would not keep pace with inflation. The TOPS program would not be fully funded for a second year in a row. Adding in those costs would require an extra $400 million in revenue.