Louisiana Senate President John Alario recalls a time when lawmakers huddled on the House floor to resolve budget debates by deciding the price of oil.
Their purpose was to skirt political intransigence by simply adding 50-cents or so to the average annual price per barrel to give the formula that determined how much state government had available enough umpf to spit out an amount that covered the project a legislator wanted, said the Westwego Republican who has served nearly a half-century in the Louisiana Legislature.
Hoping for a little more reality and a lot less razzle-dazzle, voters in 1990 created the Revenue Estimating Conference that was supposed to replace convenience with science and separate the spending part of the conversation from the part deciding how much money was available.
But oil prices and hard politics remain the base of any debate about revenues in Louisiana. That truth will be evident Monday when the REC meets again.
The REC is made up of the speaker of the House, the president of the Senate, the governor and an independent economist. All four must agree to an estimate calculated by two economists — one working for the governor and one working for the Legislature. State government builds its proposed spending plan for the coming fiscal year off the revenue number the REC officially recognizes.
For years REC went about its business in a routine way until “a couple weeks ago when the member of the House of Representatives, for the first time ever, injected the issue of government spending at a REC meeting,” said Commissioner of Administration Jay Dardenne, who sits on the REC as Democratic Gov. John Bel Edwards’ representative.
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House Appropriations Committee Chairman Cameron Henry, the Metairie Republican sitting in for the speaker of the House on Nov. 27, refused to recognize a revenue increase. His decision jeopardized the deal that ended a two-year fight over the budget. To win votes, lawmakers had agreed, provided money was available, to fund $43.3 million for several programs, including paying sheriffs $10.5 million to house state offenders and the Attorney General $869,649 for his Medicaid Fraud task force.
Henry said he didn’t see the need to rush a decision and possibly saddle taxpayers with additional expenses while confusion in the oil market could lead to another downturn.
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Alario and Dardenne are prepared to call a REC meeting every day this week until the panel confirms an official forecast that is increased enough for the last Joint Legislative Budget Committee to consider the $43.3 million “below the line” projects.
Edwards argues that Louisiana’s economy has rebounded and state government could collect up to $163 million more than expected this fiscal year and up to $195 million more for the fiscal year that starts July 1. That should cover the $43.3 million and another $100 million for the teacher pay raises Edwards wants to pass.
House Speaker Taylor Barras, the New Iberia Republican is a member of the REC, suspects the projected revenues are not sustainable. The increases were driven by legislative changes “rather than economic improvement,” he wrote Dardenne on Nov. 30.
House leadership has long criticized the REC. As far back as April 2017 — seven legislative sessions ago — House Majority Leader Lance Harris, R-Alexandria, was telling GOP faithful: “They never get it right.”
A volatile energy market makes those estimates even dicier. Oil prices had been rising since the last collapse in 2015, which is good news for American producers like Louisiana, where the energy industry paid an annual average wage of $96,500 to 44,580 employees last year when oil was about $67 a barrel.
But higher prices hurt consumers and November’s price drop to about $54 per barrel was greeted with accolades in some political quarters. “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy!” President Donald Trump tweeted Nov. 21.
Major oil states like Saudi Arabia and Russia are talking this week about reducing production to raise the price again.
LSU economist Jim Richardson, a member of the REC, asked to run the numbers using $51 a barrel instead of about $60. He was OK with accepting the projections at around $60 — the taxes and royalties being collected now are based on the higher price — but thought it prudent to get ahead of curve, just in case.
Economists Manfredo Dix, for the Division of Administration, and Greg Albrecht, for the Legislature, will present those calculations Monday, if asked. The expected revenue uptick will be impacted, but REC members say the state will still have enough money for the promised projects and teacher pay raises.
Will that be enough to win over Barras? He didn’t respond to queries from The Advocate. Will Barras even show up? He hasn’t responded to queries from Dardenne, either.