Louisiana's $315 million deficit from last year was mainly driven by continuing dips in employment that are hammering personal income and business tax collections, the Legislature's chief economist said Thursday.
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Greg Albrecht delivered the grim assessment to the state's income forecasting panel, the Revenue Estimating Conference, with a warning: "There's no improvement in sight so far."
The economist, who has described Louisiana as in a recession, told the forecasting panel that the number of private-sector jobs in the state has been falling since last year, particularly in the oil and gas industry, but also in other high-paying fields.
"We've had declining employment or slowdown since the beginning of 2015," Albrecht said.
That has a ripple effect across income and sales tax collections, as people earn and spend less money, hitting state coffers — and providing fewer dollars to pay for state services and programs.
Louisiana's unemployment rate is 6.4 percent, third-worst among states. The number of people working in the mining sector, which includes the oil and gas industry, has fallen 30 percent since December 2014, according to Albrecht's data.
The state closed the books on the financial year that ended June 30 having collected $315.5 million less than budgeted. Gov. John Bel Edwards and lawmakers will have to close that gap in the current budget year and already are drawing up plans for potential cuts.
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"What we need is employment growth to stop declining. It boils down to that," Albrecht said. "Recovery for us is being pushed back. It doesn't look like we're going to even start to see anything until we're well into 2017 sometime."
In the two heaviest hits, Louisiana took in $105 million, or nearly 4 percent, less than expected from personal income taxes and $110 million, or 31 percent, less than expected from corporate taxes.
The state has had difficulty forecasting corporate tax collections.
Albrecht said economists initially projected Louisiana would bring in more than $780 million in corporate taxes during the past fiscal year, a number that was repeatedly revised downward. And the state still didn't reach the lowest forecast. When the budget year was over, Louisiana received $249 million in business tax payments.
Albrecht said the amount of tax breaks paid to businesses continues to soar, despite legislative efforts to scale back the tax break spending. He said the increase could be a combination of companies rushing to claim available tax breaks or being able to write off the larger losses that they are seeing in the state's struggling economy.
Commissioner of Administration Jay Dardenne, the governor's top budget adviser, warned that Louisiana's income projections in the current year also could be too high, worsening the financial gap.
"The big challenge for the state right now is to reverse that (unemployment) trend and get more people working so that they're paying income tax and that they're buying more things," Dardenne said.
But the revenue forecasting panel didn't drop this year's income projections yet, waiting another month to review tax collection data. The state gave out extensions for tax payments after mid-August floods ravaged south Louisiana, adding more uncertainty than usual into the mix, so state officials want more time to track the numbers.
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