Analysis: Another Year, Another Budget Gap For Louisiana

BATON ROUGE (AP) — Lawmakers who crossed their fingers and hoped that passing more than a billion dollars in new taxes would at least temporarily end Louisiana's financial problems and stabilize the budget have seen those hopes dashed.

         Instead, the state's once again awash in red ink, with a larger-than-expected $313 million deficit left over from last year and warnings the gap could worsen because this year's income projections might have been too optimistic.

         For a ninth year in a row, Louisiana's governor and lawmakers are looking for ways to come up with cash to plug holes — and readying to slash the budget yet again.

         Expectations from House Republicans that the state may have more money to pour into programs than they budgeted, to help fill gaps in the TOPS free college tuition program, apparently won't pan out.

         Tax collections continue to fall below expectations, as Louisiana struggles through what the Legislature's chief economist has called a state recession.

         Gov. John Bel Edwards' chief budget architect, Commissioner of Administration Jay Dardenne, is warning that cuts are on the way for the nearly $28 billion state budget.

         "We've got big problems on the horizon," Dardenne told the Joint Legislative Committee on the Budget.

         Lawmakers can't say they weren't told that problems loomed.

         In the final days of the last legislative session, LSU economist Jim Richardson, who sits on the state's income forecasting panel, said Louisiana could close the books on the budget year that ended June 30 with a deficit as large as $200 million.

         Lawmakers, particularly House Republicans, resisted further tax increases to close the gap.

         At the time, they had already agreed to recent rounds of tax increases projected to raise $1.5 billion for this year's budget. House Republicans said it was too soon to know how the accounting on last year would shake out, and they thought the tax projections developed by their economists might have low-balled how much money actually would be raised this year.

         Now, it appears the opposite could be true — that those tax projections were overly optimistic. Dardenne told lawmakers that economists have been tracking this year's tax collections, and "It's not looking real good."

         Edwards pointed out that lawmakers knew troubles were on the horizon, even if they didn't know how large the problem might be.

         "We had an opportunity to make sure we didn't end up here," he said.

         But even if taxes had been raised higher, the state remains mired in a period of widespread financial uncertainty. The impact of tax changes passed over two years remains unclear. The depth of Louisiana's apparent recession remains unclear. The impact of recent flooding that ravaged south Louisiana in August remains unclear.

         Lawmakers, meanwhile, created a nearly $1.5 billion financial cliff for themselves in 2018, when taxes passed this year hit their expiration dates.

         Aiming to lessen all the financial instability, Edwards and lawmakers say they'll be focused on a widespread tax overhaul in the 2017 regular legislative session. A 13-member study group of economists, tax experts and other policy leaders, created by state lawmakers, is recommending a full-scale rewrite of Louisiana's personal income, sales and property tax laws.

         Initial responses from special interest groups about the recommendations have been positive — but with caveats to suggest they weren't embracing the proposals wholesale.

         The messy part of debating these ideas is just beginning.

         While everyone in the Louisiana Capitol seems to be on board with the idea of "tax reform," traditional tensions remain over what that should look like.

         Republicans will want spending cuts linked with tax changes, while Democrats will look more toward taxes to keep from making reductions. Tax reform involves picking winners and losers among income groups and business types. Sales taxes hit the poor more aggressively, while income taxes tend to hit the wealthy harder.

         Before they get to that tax revamp discussion, however, the governor and lawmakers will have to decide how to close a $313 million budget gap that is only likely to grow larger in the coming weeks.

         – by AP Reporter Melinda Deslatte



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