BATON ROUGE, Louisiana — Louisiana will have to close a more than $103 million deficit in the remaining five months of the budget year, as the steep drop in oil prices worsens the state's ongoing financial problems.
Next year's budget shortfall also has deepened, now reaching $1.6 billion.
The state's income forecasting panel, called the Revenue Estimating Conference, lessened revenue projections Monday for the fiscal year that ends June 30 and for the next budget year that begins July 1, to account for the continuing slide in per-barrel oil prices.
As he presented his recommended drops in the forecast, the Legislature's chief economist Greg Albrecht summed it up: "The news is bad."
Up first, the state must close the current $103.5 million deficit that has opened up in its $25 billion budget.
Gov. Bobby Jindal's chief budget adviser, Commissioner of Administration Kristy Nichols, said she expects to ask lawmakers to approve a budget rebalancing proposal in about two weeks.
It's the second midyear deficit since November. But while the first $170 million gap was largely closed with patchwork financing, Nichols said this second deficit will involve mainly cuts. State agencies will be forced to slash spending with only a few months to eliminate the money, worsening the impact of the reductions.
As always, the largest areas of discretionary spending — and therefore, the most vulnerable to cuts — are health care services and public colleges. Nichols said the Jindal administration is "still striving" to shield higher education from midyear cuts.
Drivers have gotten relief at the gas pump from the fall in oil prices, but such dramatic dips in per-barrel price can wreak havoc on Louisiana's budget.
About 13 percent of Louisiana's state general fund this year is tied to severance taxes and mineral royalties from energy production. For every dollar drop in the annual oil price for income projections, that's about an $11 million hit to the state general fund, Albrecht said.
The per-barrel oil price built into the budget has been cut by more than half from where it once was. "That's going to be a very serious hit," Albrecht said.
After shrinking the state's income forecast for this year, the Revenue Estimating Conference then cut next year's forecast by nearly $204 million, deepening a budget gap that had been pegged at $1.4 billion before the latest revisions.
"It's a compounding problem," Nichols said.
The four-member forecasting panel includes Nichols, the Senate president, the House speaker and an independent LSU economist. Changes to the forecast must be unanimous.
House Speaker Chuck Kleckley, R-Lake Charles, questioned whether the forecast changes needed to be so large. He said he doesn't think the state hasn't seen the full effect yet of a sales tax bump when people spend the money they've saved on gasoline. But despite his concerns, he agreed to the revised projections.
Jindal's budget proposal for how to close that $1.6 billion shortfall for next year is due to lawmakers by the end of February. That problem, however, isn't tied solely to plunging oil prices, just worsened by it.