Next fiscal forecast is a $440M deficit

Less than day after the Louisiana Legislature closed the $304 million mid-year budget deficit, the Joint Legislative Committee on the Budget Thursday heard Gov. John Bel Edwards’ plan to address the $440 million shortfall for the next fiscal year, 2017-18.
The budget would annualize many of the cuts made in the current fiscal year. while reducing the Department of Health and Hospitals’ budget by an additional $184 million in general fund support. Every other department would take a 2 percent decrease from current budgets.
Commissioner of Administration Jay Dardenne said this isn’t the budget the administration would like to propose, but it is what is necessary.
“We think we have more needs in government that we all agree need to be funded, but unless and until new revenue is recognized one way or the other we have to live within our means,” Dardenne said.
It would cost the state $9.9 billion to maintain current levels of funding, according to the governor’s executive budget. But the Revenue Estimating Conference (REC) projects only $9.4 billion in general fund revenue for FY 17-18.
Some legislators expressed doubt with the REC revenue projects, figuring it’s too high. They noted the state has dealt with a mid-year shortfall when the actual revenues are realized for the past eight years.
Rep. John Schroder, R-Covington, one of several announced candidates for the State Treasurere vacancy attending the meeting, suggested “backing off” the $9.4 billion figure and building a budget around a lower figure to head off potential shortfalls.
“I’ve never seen a Legislature that didn’t want to spend every bit of revenue available to it,” Dardenne said. “It makes sense to me from a budgeting practice, but I don’t think we’re there yet.”
The governor’s plan would not fully fund TOPS, but maintain its current year levels. It also would not budget performance increases for state employees. However, TOPS and state workers topped the governor’s list of recommended restorations should additional money be realized.
There also would be no progress in increasing deferred maintenance funds or meeting the Department of Transportation and Development’s $13.1 billion backlog of road and bridge preservation. DOTD currently projects a $212 million funding shortfall for FY 2017-18, Dardenne said.
Sen. Regina Barrow, D-Baton Rouge, voiced concerns over continual cuts, and said the state’s budget is already so lean that she questions whether state programs remain effective for constituents. Even if programs have funding, if wait times are increasing and health care waivers are unavailable then the programs aren’t serving the public well, she said.
“I keep hearing people saying we’re doing more with less, but at some point you begin to do less with less and actually start to become ineffective. I don’t see where we can cut and still be effective. We can provide services, but are we being effective?”
The Legislature is expected to take up recommendations from the Task Force on Structural Changes in Budget and Tax Policy to debate the current tax structure and tax exemptions during the regular session that begins April 10.
The governor’s budget projected a $6.7 billion revenue loss from tax exemptions for FY2017-18. Rep. C. Denise Marcelle, D-Baton Rouge, questioned when legislators are going to make the tough calls and work toward significant tax reform.
“Reform is in the eye of the beholder, and has a lot of different meanings for a lot of different people,” Dardenne said.
Dardenne said the governor has not decided on a recommendation to endorse, but agrees that the current system is not working. The administration hopes to establish a more broad-based, fairly distributed method of taxing to improve the revenue base, he said.
The joint committee approved a $383,975 cut to statutory dedications that, combined with the adjustments made during the special session, would officially close the mid-year deficit.