More cuts possible for Louisiana higher education, health care; another $100M needed to balance budget
More cuts needed to balance budget
by mark ballard|

Jan. 29, 2015

For the second time since November, the Jindal administration is going to have to find another hundred million dollars or so to balance this year’s state government budget.

The Revenue Estimating Conference decided Monday that the state should again lower its expectations for collections from taxes and other sources. The amount reduced ultimately will be another $103.5 million or so. State government is only allowed to spend the money identified by the REC.

In all, the new projection is about $300 million less money than the state initially counted when drafting its budget last year. That means the Jindal administration again must reduce spending for this fiscal year, which ends June 30.

But that’s this year.

Going into Fiscal Year 2016, which begins July 1, the expected revenues will drop another $203.8 million. Next year’s revenues already were expected to be short $1.4 billion, largely because money used to pay government expenses this year will be unavailable in Fiscal Year 2016.
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Commissioner of Administration Kristy Nichols, who was able to rebalance the budget after a similar deficit announcement in November largely by juggling various funds, said this time the administration would rely primarily on spending reductions to rebalance the budget. As Gov. Bobby Jindal’s chief budget advisor, Nichols said she hoped — but couldn’t promise — that nobody would lose their job and that no cuts would be made to public colleges, universities and health care before next fiscal year. Higher education and health care already are in line for cuts of up to $300 million each for Fiscal Year 2016.

Nichols expects to present her plan to rebalance the budget in about two weeks.

Greg Albrecht, the Legislature’s economist, priced oil at $69.30 per barrel, which is down nearly $12 per barrel since November and about $26 less than the $95.80 price on which the budget was drafted last May.

Sales tax collections have come in higher than expected, but not enough to cover the losses from the dramatic decrease in the price of oil, according to the economists’ reports.

Senate President John Alario, who heads the four-member Revenue Estimating Conference, noted that the economists for the state and for the Legislature rarely agree but both reported similar findings and were only $10 million apart in their conclusions.

“In terms of the oil price number, I think we need to be very prudent,” said Jim Richardson, an LSU economist who also is a member of the REC. His reading of market analyses suggest that oil prices likely will stay lower for a long period of time.

The Revenue Estimating Conference, which was created after the collapse of oil prices in the 1980s, reviews the actual dollars state government collects throughout the year and adjusts the projections on which spending was based. It includes two state lawmakers, the Jindal administration’s budget official and the LSU economist.

Nichols, who represents the Jindal administration on the panel, recommended going with the lower estimated price of oil, which produced a larger reduction in expected revenues.

To balance this year’s budget, Nichols said she would fast-track to this year some cuts being planned for next year to capture some of the savings earlier and help balance the current year’s budget. “It’ll be large part of how we’re going to solve the mid-year,” Nichols said.

She already has asked agencies to identify cuts that could be made now and those that were planned for FY2016. Nichols said she could not preclude any state government layoffs, but didn’t expect any significant job actions.

“Our first priority is to take vacant positions and you will see that. And to reduce administrative costs. And to not impact services and not make layoffs,” Nichols said.

The budget plans for the next fiscal year, which will be released near the end of February, could mean that some state workers lose their jobs.

Any effort to eliminate workers would take place as part of initiatives for consolidation or duplicative functions of state government, Nichols said.

Personal income tax collections are forecast to grow and probably will, but the money has not been collected yet.

Royalties, severance taxes and other mineral-related revenues, along sales taxes and personal income taxes are where state government receives the bulk, by far, of the money needed to pay salaries, fund public schools, universities and technical training, supplement law enforcement salaries, repair roads, among many other services.

“It’s really hard to make up for a direct drop in mineral revenues,” Albrecht said.

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