Zachary Fitzgerald
Louisiana’s Legislature appears to be headed for its sixth special session since the start of 2016 to address the state’s budget woes.
The unpredictability of the budget each year needs to change, said James Richardson, an LSU economics professor.
Richardson was guest speaker Monday during a St. Mary Industrial Group meeting at the Petroleum Club of Morgan City. He is director of the Public Administration Institute at LSU’s E.J. Ourso College of Business.
He is also a member of state government’s Revenue Estimating Conference which projects how much revenue the state can expect to get each year.
All of the turmoil surrounding Louisiana government’s budget difficulties during the past few years highlights the need for a long-term budget plan, Richardson said.
“Our revenues tend to be sporadic. They’re short term,” he said.
Such a long-term plan would help businesses and people throughout the state. They want more certainty each year on funding of key areas, such as higher education institutions and health care services, he said.
“I think this is one place where we, as a state, have failed,” Richardson said.
The Legislature is in the midst of the 2018 regular session that began March 12. Legislators cannot raise any taxes during this year’s regular session because it isn’t a fiscal session, which only occurs in odd-numbered years.
Richardson expects legislators will likely end the regular session early and go into a special session to discuss possible budget fixes.
That special session will probably start around May 20 and ideally end by June 4 when the regular session was scheduled to adjourn, he said.
In 2016, the Legislature imposed temporary taxes, particularly a one-cent state sales tax increase and limitation on sales tax exemptions, to avoid deeper spending cuts at the time. In total, the state currently has a 5 cent sales tax on each dollar.
“Odds are that will come down to about 4.5 percent,” Richardson said.
The 1 cent sales tax and other temporary taxes are set to expire June 30, leaving state leaders with a gap to fill in the budget. This gap is known as the “fiscal cliff.”
Officials project that the fiscal cliff will be about $650 million for the state’s 2018-19 fiscal year beginning July 1. The state’s annual budget is roughly $30 billion.
State income taxes are almost certain to increase. Because of the lowering of federal income tax rates, “you are going to pay higher income taxes … in the state,” Richardson said.
Legislators have limited areas to look for possible spending cuts. About half of the state’s budget is federal money, so state officials can’t change how that money is spent.
On top of that, fees generated by certain services aren’t “really the cuttable part,” Richardson said.
Constitutional and statutorily dedicated funds are nearly impossible or at least extremely difficult to cut. So only $3 billion to $4 billion of the budget is really available to look for cuts, he said.
“You appreciate why the Legislature is having such a hard time coming to a consensus because everybody sees the world a little bit differently,” Richardson said.
State government has a few difficult choices of areas to cut within higher education and health care. TOPS, which helps pay for many students’ college tuition, would be one of the easiest to cut from an administrative standpoint, but it would be politically unpopular, Richardson said.
Other options within higher education include cutting programs, eliminating schools or telling colleges to raise tuition, he said.
Health care is a big part of the budget, too. But for every $1 the state saves on state spending, it loses $2 or $3 in federal spending. Undoing the state’s public-private, charity hospital contracts would be a difficult task, too, he said.