Budget Situation Gets Worse on Eve of Special Session

It didn’t take long after lawmakers left the state Capitol in June to figure out that declining oil prices and lower-than-expected revenue predictions were creating major problems for the budget they had just passed. So back in November they approved yet another round of mid-year cuts with the “nod, nod, wink, wink” expectation that would address the problem. Of course, it didn’t.

A month or so later, when the John Bel Edwards administration was still in transition mode, word began to get out that things were still bleaker than they thought. They eventually put a number on it and announced that for the current budget year that ends June 30 the state would be about $700-$750 million short of needed revenues to avoid a deficit. The number going forward for the 2016-17 fiscal year was a whopping $1.9 billion short of what would be needed.

Now, with the special session that’s supposed to fix the problem upon us, we find out that things are even worse than that. The state’s Revenue Estimating Conference met this week and further reduced its revenue projections for both this year and the next. The bottom line is that the short-term problem has now grown to about $850 million and the long-term shortfall looks more like something over $2 billion.

That’s a lot of money and it dwarfs all of the very significant budget problems the state has faced over the last seven years. The problem in the current fiscal year is the most immediate and, in many ways, the toughest nut to crack.

It wasn’t that long ago when the state was dealing with $800 million shortfalls for the entire year and that was considered big. Now we’re dealing with an $850 million shortfall that must be made up in the three or so months remaining in the fiscal year. Of course, the governor has proposed a plan to address the issue and because it includes new taxes across a wide spectrum of people and businesses it’s receiving a lot of pushback. That’s a natural reaction and it’s okay. Solving serious problems is a process, not an edict, and the governor’s proposal is the beginning of a process.

The real question is, what’s next? How will lawmakers react when they get into special session, what actions will they take and how serious will they be about resolving what has grown into a very real and serious problem? At this point, it’s anyone’s guess. But there’s one thing we do know. Whatever we do, we have to get it right this time. We need to get through the immediate crisis, but we also need to make some difficult structural changes to our fiscal policy and our spending policy.

We have had hiring freezes, travel freezes, pay freezes and all sorts of other belt tightening measures. We have used just about every bit of one-time money we could find and sold just about every bit of state property we could put on the market. But we have failed to take a serious look at the systemic problem. We have done little in the way of making structural changes that actually alter the way we do things. We haven’t really changed anything.

We create new agencies and offices, but old ones never go away. We cut everyone across the board, but we don’t set priorities and invest in the things that are important.  We concentrate power, authority and a lot of spending at the state level when other states let local citizens handle those matters. And we plod along with a tax structure that doesn’t adequately support our needs. The list goes on.

All of those things are structural issues and it’s time to make a decision. Do we want to raise new revenues to continue everything just the way it is, or are we ready to consider changes that would strengthen our position for the future? Clearly Louisiana needs some source of additional stable revenues. But it also needs to take a serious look at how we spend our money and decide which of the many things we support with state dollars are really important state needs.

Ultimately, that’s what we elect state leaders to do and this time we need them to shoulder that important responsibility. With back-to-back legislative sessions bringing lawmakers to the Capitol for most of the next four months, now’s clearly the time to get started. Let’s hope they’re really serious when they talk about putting Louisiana first.

Return to Post Archive