For something like six out of the last seven years, taxes, royalties and other revenues didn’t materialize as hoped back when lawmakers drafted the budget.
On Friday, the state, again, had to officially reduce estimated revenue collections in the middle of the fiscal year, this time by $171 million. The midyear declaration of a new, lower revenue projection is necessary to start the machinery that leads to rebalancing the budget, which means some programs may get cut, some college classes may not get offered and some jobs may be lost.
Commissioner of Administration Kristy Nichols, the governor’s top adviser on the state budget, says the regularity of these midyear recalibrations is, at least partly, the product of the administration’s aggressiveness in following and swiftly reacting to the ever-changing economic environment. This year’s revenue adjustment is due, mainly, to declining oil prices and personal income taxes not growing as fast as expected.
Other issues are in play too.
Louisiana and other states are generally, if slowly, rebounding from what is being called the Great Recession, which began under President George W. Bush and officially ended in 2009, according to an examination of the fiscal health of all 50 states released last week by the Pew Research Center, a Washington, D.C.-based government policy research group funded with money from trusts set up by the founders of Sun Oil Co.
Yet, Louisiana’s revenue growth lags behind the national average and even states like Mississippi and Arkansas, according to the survey.
It’s one thing to have midyear cuts and shortfalls when the economy is going through a recession. But Louisiana’s economy has been growing each year, with an unemployment rate below 6 percent and with thousands of new jobs being created every year. And just over the horizon are tens of billions of dollars of investments for new and expanded manufacturing plants.
Louisiana, according to Jan Moller, director of the Louisiana Budget Project, is still feeling the impact of recent tax cuts, which drained money from the revenues needed to pay for services. The funds still have not been replaced, but the programs are still on the books and still wanted by taxpayers.
“Everybody keeps waiting for state revenues to catch up with growth, and that just hasn’t been happening,” said Moller, whose Baton Rouge-based, left-of-center group studies state government budget policies from the perspective of people with low and moderate income.
LSU economist James Richardson says that back in 2008, Louisiana collected about $12 billion from taxes, fees and such. Revenues are now running at about $9 billion to $10 billion.
About a third of the difference comes from tax cuts, particularly the rollback of the so-called Stelly Plan, Richardson says. The rest came from falling oil prices, a drop in tax collection on corporate profits and the lingering effects of the recession. (Stelly is the name of the program in which the state’s voters in 2002 got rid of state sales taxes on groceries and utilities, which were to be offset by raising personal income taxes. By 2009, legislators effectively negated the income tax increases but left sales taxes repealed.)
Additionally, the tax structure siphons off billions of dollars to cover any number of tax exemptions, credits, amnesties and “incentives.”
State Rep. Brett Geymann, leader of the fiscal hawks, says Louisiana has yet to fix its spending to match its revenues; consequently, the state budget has deficits embedded into its very foundation.
“There’s this constant juggling of all the numbers and using accounting tricks and gimmicks to try to find our way through another year, just to turn around and find ourselves in the same position next year,” he said.
The fiscal hawks are a handful of legislators who complain about how the governor and his majority in the Legislature go about drafting the state budget each year.
The Lake Charles Republican says elected officials routinely duck the hard questions about determining the proper role for state government — that is, what programs are important enough to be funded and where is the money found. That exercise means making choices that some people are just not going to like.
“Nobody wants to deal with the issue. It’s not going to be fun. It’s going to be painful, and people are going to be angry,” Geymann said. “But until we do the hard work, we’re always going have this problem year in and year out.”
It’s a question to ponder while sitting in traffic on highways too small to handle the volume of vehicles or waiting for your number to be called at the Office of Motor Vehicles.
Mark Ballard is editor of The Advocate Capitol news bureau. His email address is firstname.lastname@example.org. Follow him on Twitter, @MarkBallardCNB. For more coverage of government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog/