Gov. Bobby Jindal and state legislators were all smiles when they passed the state budget in June, saying they had ended Louisiana’s worst budget crisis in 25 years and averted deep spending cuts to LSU, UNO and other colleges and universities that the public opposed.
But less than three months later, the budget already is beginning to bleed red ink, and programs for those institutions are again at risk.
Legislators and Jindal are facing calls that they act without delay to make the cuts needed to bring the budget back into balance as required under the state constitution — rather than take the politically easy way out by passing the buck to the next governor and Legislature.
“There’s a lot of pressure to do something now,” said Jim Brown, a former state senator and secretary of state who writes frequently about political affairs in Louisiana. “But legislators who find themselves in tough races won’t want to touch it with a 10-foot pole.”
Having to acknowledge that his final budget is already out of whack surely would not be welcome news for Jindal, who is telling audiences throughout Iowa that he can manage the economy better than President Barack Obama or Hillary Clinton.
“The administration clearly wants to push it off to the next governor,” said state Treasurer John Kennedy, who, like Jindal, is a Republican.
Kristy Nichols, the governor’s top budget adviser, disputes that. “We’ll make the tough decisions we have to make,” she said.
No matter what, independent analysts agree, the next governor and Legislature will inherit a major budget deficit from the outgoing governor and Legislature — at least $700 million, according to the Legislative Fiscal Office — when they meet in regular session in 2016 to approve the following year’s budget.
What’s more, the fiscal year that ended on June 30 appears likely to have ended with a $50 million deficit, Kennedy said.
“We have hit the trifecta in a bad way,” he said, referring to the apparent budget shortfalls for the fiscal year that just ended, the one now underway and the one that will be before legislators next year.
At issue now are the problems with the budget for the current fiscal year that began on July 1.
The Jindal administration already made a $4.6 million cut in the current budget last month when a state panel known as the Revenue Estimating Conference determined that legislators had overestimated revenue from several tax measures approved during the 2015 legislative session.
Since then, the Jindal administration has acknowledged that legislators and the governor shorted the popular Taylor Opportunity Program for Students by $19 million. To make TOPS whole, Jindal and legislators will have to take money from elsewhere in the budget, probably from funds already appropriated for colleges and universities.
Meanwhile, the Legislative Fiscal Office — which works for the state Legislature — has reported that Louisiana’s Medicaid program is facing a $335 million gap. Shawn Hotstream, the office’s health care budget expert, wrote in July that the Jindal administration failed to fund numerous Medicaid programs at the amounts sought by the Department of Health and Hospitals to keep up with expected costs.
DHH will have a better read on a potential deficit after the first quarter of the fiscal year ends on Sept. 30, an agency spokeswoman said in an email.
Nichols said DHH will have to live within its means if the shortfall does indeed materialize.
Perhaps most worrisome for the budget: State legislators assumed that oil would average $61.70 per barrel. Instead, oil has sold for less than $50 per barrel during the past six weeks. For every $1 drop in oil prices below the $61.70 average over the year, the state loses about $12 million in taxes.
“We’re watching the price of oil like everyone else,” said Jan Moller, director of the Louisiana Budget Project, a Baton Rouge-based nonprofit. “We knew that the budget passed in the spring would show cracks, and that’s happening already. We know that critical health care and education services are most at risk when midyear cuts have to be made. And it looks like they will be needed at some point.”
The four-member Revenue Estimating Conference is the entity that would force the budget cuts, but don’t look for it to take action in the next few weeks.
One of the members is Senate President John Alario, R-Westwego, and another is House Speaker Chuck Kleckley, R-Lake Charles. In interviews, both men expressed concern about the budget situation but cautioned patience.
“If we have to make adjustments, we’ll make them,” Kleckley said. “It’s a little too early at this point. We’re only in the second month of the new fiscal year.”
“I’d hate to tell the universities and health care systems now that we have to make cuts and then learn later that we didn’t have to,” Alario said.
He added that he expects the panel will have the information it needs by late October or early November. That would be good news for many legislators seeking re-election — a group that includes Alario — because the primary election is Oct. 24.
“The timing of the election would have nothing to do with it,” Alario said.
Nichols, the panel’s third member, also said policymakers need time not only to get a better read on oil prices — currently about $47 per barrel — but also to determine whether personal income, sales and corporate tax receipts are significantly higher than expected.
So far they aren’t, said Greg Albrecht, the Legislature’s chief economist, who projected an average oil price of $61 per barrel at the Revenue Estimating Conference’s meeting in May.
The Jindal administration’s chief economist, Manfred Dix, offered the $61.70 estimate — the figure adopted by the Revenue Estimating Conference and, in turn, state legislators when they approved the budget in June.
Now, with both forecasts looking too optimistic, policymakers likely will have to cut university and college programs and health programs for the poor to make up the lost tax revenue.
“We cannot wait until January or February to act if oil prices stay the way they are,” said Jim Richardson, an LSU economist and the panel’s fourth member. “There is a reluctance to change the numbers that would lead to budget cuts in an election season. But at the end of the day, we’ll do the right thing.”
C.B. Forgotston, a blogger and veteran fiscal hawk, believes that Jindal and legislators deliberately fudged the spending and revenue figures when they approved the budget in June in order to reduce the pain of spending cuts.
“The truth is those responsible for maintaining a balanced budget put their personal political interests ahead of their fiduciary responsibility to the citizens of our state,” he wrote in an email.
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.