With the state staring at a budget shortfall of as much as $1.6 billion in the next fiscal year and having to take extreme measures just to keep paying its bills, Gov.-elect John Bel Edwards on Friday painted a picture of significant struggles ahead but said he is “bullish” about Louisiana’s future.
In a speech dense with both bleak budget figures and ambitious goals for funding transportation and higher education, Edwards told business leaders gathered at the New Orleans Chamber of Commerce’s annual luncheon that while hard choices are coming, the payoff would be worth it.
Edwards, a Democrat, seemed to be driven both by what he described as a realization that the state’s budget problems are even more acute than previously believed and by the recognition that solutions would not necessarily be popular with the hundreds of business leaders gathered before him.
“Your mission and mine in many ways are very similar,” Edwards said. “The state needs more collaboration and less division.”
The speech came a day after state committees signed off on a plan to take out a short-term loan to raise $254.9 million needed to keep construction projects on track for the next six to nine months — a move that has not been necessary in three decades.
Edwards pointed to other recent signs of a significant cash-flow problem, including the need for other borrowing, and the selling of securities to keep some agencies afloat and ensure state funding for local schools.
The speech seemed to mark a shift in tone for Edwards, whose previous public appearances since his Nov. 21 election have been more of a continuation of his campaign rallies.
The state’s budget problems, Edwards argued, began with the partial repeal of the Stelly Plan. That plan originally had raised taxes on high-income earners while adding significant exemptions from the sales tax. But early in Gov. Bobby Jindal’s first term, the income tax increases were repealed, a move that has cost the state between $700 million and $1 billion a year, Edwards said.
That drop in revenue led to eight years of budget shortfalls, which have fallen hardest on higher education and health care, the two major areas of state spending not protected from significant cuts.
After the speech, Edwards indicated that he focused on the Stelley Plan to explain what he saw as the cause of the problem. A spokesman later said that all options are being considered as officials look for ways to deal with the revenue shortfall.
The detailed explanation of the grim budget situation may be aimed at warding off criticism of plans the administration is expected to push early next year to raise more revenue. While some of the needed money may be found by removing restrictions on funds dedicated to specific uses, the majority is expected to come from trimming tax credits and raising revenue through tax increases, neither of which is expected to play well with the business community.
“We’re going to have to put all options on the table,” Edwards said.
And given the magnitude of the problem, he said, it cannot all be blamed on waste or fraud in state government.
“We simply cannot cut our way to a balanced budget,” he said.
The focus on the budget also steered the conversation away from areas where Edwards and many chamber members don’t see eye to eye, such as his call to raise the state’s minimum wage, and his skepticism toward charter schools and the state’s educational voucher program.
Edwards did lay out other priorities, including the need to provide better funding for higher education and a defense of his plans to expand the Medicaid program. He described that expansion, part of the Affordable Care Act that is more commonly known as “Obamacare,” as a way to ensure the state reaps all the benefits of a federal program that its tax dollars are helping to fund.
He also promised to pursue construction of a light rail line linking New Orleans and Baton Rouge, something business communities in both cities have sought for years as a way to boost economic development regionally. The plan has been stalled by Jindal’s rejection of federal funding for the project that would have come from the stimulus package in 2009.
“It doesn’t just get traffic off our interstates and our roads; it makes us a super region,” Edwards said of the proposed rail line.
Edwards drew applause several times by contrasting himself with the outgoing Jindal — perhaps a surprise from an audience he acknowledged was more likely to lean toward the GOP.
“I’m not going to do the same things that have been happening in Louisiana for the last eight years,” Edwards said.
Editor’s note: This story was updated on Dec. 22 to clarify that Edwards did not definitively rule out reinstating the higher income taxes that were part of the original Stelly Plan.
Follow Jeff Adelson on Twitter, @jadelson.