Analysis: Holes and worries emerge in Louisiana's budget less than 2 months into fiscal year



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BATON ROUGE, Louisiana — As lawmakers patched their way through this year's budget, many of them talked as if they had drawn up a six-month plan, fully expecting Louisiana's next governor to come in with a broader blueprint for fixing the state's financial mess.

They may have been too generous. This budget may not even hold for six months.

One modest cut's already been required, other gaps have emerged and nose-diving oil prices could upend everything.

If Gov. Bobby Jindal's administration manages to exit in January without more budget-slashing, it could be leaving a heck of a mess for the governor coming in that month. (Jindal's term-limited and cannot run for re-election. His successor will be chosen this fall.)

And if that's not enough, the shortfall estimated already for next year's budget is pegged at $713 million.

Lawmakers pieced together a $25 billion budget for the fiscal year that began July 1, using nearly $767 million in new revenue from increased taxes and fees and tax break scale-backs.

Final versions of most of those tax bills were written in the waning hours of the legislative session, leaving estimates of their expected impact a bit sketchy.

Earlier this month, lawmakers had to trim $4.6 million in planned spending because the package of bills wasn't expected to generate all the money used in the budget. Nearly $3.8 million of the cut fell on public colleges, despite efforts from lawmakers to shield campuses from reductions.

Commissioner of Administration Kristy Nichols, Jindal's chief budget adviser, said the dollars will be restored if income forecasts improve. She said she was hopeful about that possibility.

However, even setting aside the questions of just how much money will be raised by the tax and fee bills, other gaps in the budget have started to appear.

The state's TOPS free college tuition program has $19 million less this year than its students are expected to need to fully cover their tuition costs.

The Louisiana Office of Student Financial Assistance requested $284 million from the Jindal administration and lawmakers. The final version of the budget set aside $265 million instead, not taking into account rising tuition prices, said Sujuan Boutté, executive director of the financial assistance office.

Gaps often appear in the TOPS program midyear, and lawmakers fill them to ensure students don't get less than they were promised. It's less common for the program to start off measurably short of the dollars needed.

Boutté said she doesn't expect students to be negatively affected. But it's a looming problem that will need addressing to keep the program from short-changing students.

The possible gap in Louisiana's Medicaid program is much larger.

The Legislative Fiscal Office says the budget didn't account for $335 million in increased spending that the health department anticipated across programs. Either the state has to come up with a way to cover those costs or find ways to ratchet back services in some fashion to keep the program's spending in check.

If those budget concerns weren't enough to cause headaches, oil prices threaten to wreak havoc on the state's finances.

While oil price declines are good for drivers at the gas pump, large dips in per-barrel price can force steep slashing to Louisiana's budget, which gets money from severance taxes and mineral royalties tied to energy production.

Every dollar drop in the annual oil price represents an estimated $11 million to $12 million hit to the state general fund.

This year's budget is built on a nearly $62 per barrel oil price. Oil prices have recently hovered around the low-$40 range per barrel.

Economists are awaiting more information across the state's various tax types to see if income taxes, sales tax or other revenue sources are performing better than expected and can make up the gap for sliding oil prices. But the threat of midyear budget reductions is real.

The Jindal administration is hoping to stave off those problems until it gets out the door, rather than while the Republican governor is campaigning for his presidential bid. Louisiana's next governor, however, appears likely to have immediate financial troubles awaiting him.


EDITOR'S NOTE: Melinda Deslatte covers the Louisiana Capitol for The Associated Press.

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