Louisiana legislators are throwing out all sorts of ideas to see what sticks in hopes of short-circuiting possible layoffs and deep budget cuts.
State government will bring in about $1.4 billion less next fiscal year than is needed to pay for the current level of services. Come Monday, that hole could get much larger.
To bring spending in line with the amount of money available, the Jindal administration is looking at not funding next year’s budget for the growth of inflation. That could save up to $200 million, says Commissioner of Administration Kristy Nichols, architect of the administration’s budget. Specialists looking at the state’s systems identified another $200 million or so in savings. There are other reductions and small pools of money that can be found, and there is still some property to sell.
But that leaves the state about $1 billion short for fiscal year 2016, which begins July 1.
About $300 million will be chopped off the state’s contribution to colleges and universities; another $300 million will be removed from health care; and 15 percent to 20 percent will be lopped off state agency budgets across the board.
Will state workers be laid off? Maybe.
“We’ve not made an official decision on position reduction at this point. It’s not off the table,” Nichols said.
But if what is projected comes to pass, LSU System President F. King Alexander told The Associated Press last week that the reductions LSU would receive would translate to the main campus in Baton Rouge having to halt the hiring of more than 100 new faculty members and then lay off another 200.
College system leaders, agency heads, legislators, lobbyists and administration officials are all negotiating in hopes of mitigating those outcomes before the administration releases its fiscal year 2016 budget on Feb. 27. The Legislature convenes for its regular two-month general session on April 13 and will have to approve some sort of spending plan before the end of June.
“There are a couple different schools of thought that are bouncing around,” said state Sen. Dan Claitor, a member of the Senate Finance Committee. But nobody is rallying behind a particular idea yet.
One group advocates calling a special session to address the crisis.
“Any debate is worthwhile,” Claitor said, “but if you call a special session, you’d better have a solution in mind. And if that solution doesn’t recognize what the governor’s position would be, then that’s a waste of time.”
Some legislators are looking at eliminating some of the tax exemptions and redirecting the monies to higher education or health care. Others are talking about raising new revenues by suspending exemptions and credits.
Suspending sales tax exemptions is attractive because the money would be more immediately available and because state government has done this before and already knows the procedures and processes. But choosing the right tax to suspend creates political issues. Lifting the 2010 exemption on the sales taxes businesses pay when they buy utilities would deliver the needed revenue but likely would raise a storm of protest.
Legislators and lobbyists say the biggest hurdle will be Gov. Bobby Jindal and his promise to veto any idea that hints at increasing taxes.
Perhaps the Enterprise Zone program? It includes a one-time $2,500 tax credit for each new job created and 4 percent rebate on sales and taxes paid on the purchase of certain materials and machinery. There’s also a 1.5 percent credit on some investments. Claitor said the discussion of some sort of rollback to bring the rebates back in line with the original intent of the program has been colored by what some feel would be interpreted by the governor as a tax increase and vetoed.
“Monday, we’re very likely going to make the problem worse. Can’t help it,” said Greg Albrecht, chief economist for the Legislative Fiscal Office. “These oil prices are bad. They’re bad, and they’re going to stay bad for a while,”
The Revenue Estimating Conference on Monday will weigh the reports of the Legislature’s economist, Albrecht, and the administration’s economist to determine how much money the administration can spend for the rest of this fiscal year as well as the next one starting July 1.
Albrecht wouldn’t reveal his report before telling the REC, but he predicted another drop in revenues. Sales tax collections are modestly better than thought, and personal income is expected to grow too but not enough. Royalties, severance taxes and other mineral-related revenues, along with sales taxes and personal income taxes, are where state government receives the bulk, by far, of the money.
“We had a billion-plus-dollar shortfall before oil prices ever dipped,” Albrecht said. “It’s the structural problem. It’s the use of ad hoc resources to fund recurring or sustaining budget.”
The state goes through this every year, said Republican state Rep. Brett Geymann, a member of the House Appropriations Committee and leader of a group of fiscal conservatives. Governors have long used accounting gimmicks to patch together a balanced budget.
“This year is different, and it’s compounded by the price of oil,” Geymann said. “The decline in oil prices exposed the shaky ground we’ve been built on over the past decade. There’s no other way out of it. If you don’t raise any revenues by taxes and you don’t want to get rid of any of these exemptions, rebates and credits, then let’s talk about where we stop spending and what are the consequences of that.”