Despite the Louisiana Legislature approving several tax hikes during a recent special session, the state remains about $70 million short for its budget that ends June 30.
The remaining deficit means higher education and health care again find themselves faced with the threat of cuts with just three months left in the current budget cycle.
More specific details about where the cuts will fall likely won’t be revealed until next week.
Gov. John Bel Edwards’ administration says it is still reviewing the potential impact on state services.
The remaining deficit is about three times worse than officials expected last week when lawmakers ended a 25-day special session dedicated to solving the state’s latest budget crisis.
“We didn’t really know what the numbers were,” Commissioner of Administration Jay Dardenne said Wednesday after a briefing on the latest budget outlook. “This was news to us.”
Louisiana has slugged through several patchwork budgets that have led to shortfalls in recent years. The cycle has repeatedly threatened deep cuts to state services. Republicans and Democrats have largely blamed former Gov. Bobby Jindal’s administration and its reliance on one-time money to plug holes, though the Legislature signs off on the budget every year.
Unable to completely bridge the gap in Jindal’s final spending plan during the special session, lawmakers have directed Edwards’ administration to determine another round of mid-year cuts and make the budget whole.
“I can only say it’s a big number,” Edwards, a Democrat, said after a speech to an oil and gas industry group Wednesday. “You can rest assured that health care and higher ed will take a bigger hit.”
On top of the hit to the current year’s deficit, the state faces a $750 million gap in the budget that begins July 1. Lawmakers are unable to raise revenue during the current regular session, so again cuts loom. Edwards has been open to the idea of a second special session after the regular session ends, if lawmakers agree to bring in more money.
During the recent special session, the Legislature raised the state’s sales tax by a penny, beginning April 1, and removed some exemptions from the existing four-cent sales tax.
But a late flurry of action on the legislation in the final hour of the special session left some question over just how much new revenue would be generated.
The panel that sets the state budget forecast approved figures Wednesday that estimate the sales tax hike will bring in $214 million for the current budget cycle and then $880 million for the following two years. The removal of some sales tax exemptions will bring in an estimated $66.7 million for the budget that ends June 30 and $272 million for the following two budget cycles.
Lawmakers also agreed to increase taxes on alcohol, cigarettes, car rentals and other items.
Based on figures approved by the Revenue Estimating Conference on Wednesday, the Legislature managed to bring in about $300 million in increased revenue for the remainder of the current budget and $1.26 billion for the next budget year.
Lawmakers also pulled $128 million from the rainy day fund and $200 million in BP oil spill settlement funds to help plug the hole in this year’s budget.
The governor and legislators also already trimmed $160 million from the budget.
LSU President F. King Alexander said administrators have a “ball park” idea of what the latest round of cuts to higher education will be, but he noted that colleges already are taking an additional $28 million hit because of a shortfall in the Taylor Opportunity Program for Students. LSU has the most students on the scholarship program.
“If they don’t mitigate that cut, it will be pretty painful,” Alexander said. “If they do mitigate it, I think we can get away with some across-the-board reductions and limp through the rest of the year.”
Monty Sullivan, president of the Louisiana Community and Technical College System, didn’t want to speculate about cuts until the numbers are firm, but he noted that in previous budget cuts, health care and higher education have split the shortfall and then the two-year system absorbs 20 percent of the total higher education cut.
“We want to wait to see what comes from the administration and what comes from whatever game plan lies ahead,” he said. “Then we’ll begin to develop a plan based on those numbers.”
Timing is particularly pressing for the mid-year reductions because the tight timeline magnifies the impact of cuts.
“Every single day that passes without us knowing the number, the impact is broadening,” Sullivan said.
The consistent cycle of budget uncertainty has already dealt a blow to the state’s borrowing capacity, and Edwards said he’s concerned agencies are focused on the state’s financial situation for the upcoming year. Moody’s Investors Service last month downgraded the state’s credit rating.
Edwards said he plans to meet with representatives from the bond rating agencies Thursday, at his request.
“I hope that it goes well,” he said. “I will make the best case that I can.”
Tyler Bridges and Rebekah Allen of The Advocate Capitol News Bureau contributed to this report.