Jindal administration to announce $129 million in cuts; colleges and ...

"I don't know if there was any fat left two or three years ago. But that didn't stop us from cutting." -- House Appropriations Chairman Jim Fannin

Gov. Bobby Jindal's administration will announce $129 million in budget cuts Friday aimed at making up a revenue shortfall in the past six months of the state's fiscal year. The cuts are expected to fall heaviest on the state's higher education and health care systems, which have already seen significant cuts in recent years, and come after the Louisiana Revenue Estimating Conference on Thursday dropped its estimates of how much money the state will bring in this year.

Commissioner of Administration Kristy Nichols said the governor's office had expected there would be a need to make mid-year cuts to the state's $25 billion budget and will present specifics this week. While the administration's proposal will be unveiled to the Joint Legislative Committee on the Budget, Nichols said the cuts will not exceed regulations on how much the governor can cut agency budgets without legislative approval, meaning lawmakers will have no say in where the ax will fall.

With this round of cuts, Jindal will have enacted mid-year budget reductions in each of his five years in office in response to revenue shortfalls. And, based on another set of revised projections approved Thursday, next year's state budget, which was already facing a nearly $1 billion shortfall could be about $207 million tighter.

Nichols did not go into specifics about where the cuts will come Thursday. However, the only two areas of significant spending that are not protected by law or the state constitution are the state's colleges and health care programs. Those services have already been battered by previous cuts, both due reductions at the state level and because of a reduction in the state's federal reimbursement for Medicaid expenditures.

"The only thing that's off the table is raising taxes," Nichols said.

While legislators are constitutionally permitted to propose tax increases this year since the legislative session that starts in April is a biennial "fiscal session," Jindal administration officials have made it clear that they will veto revenue-raising bills that are not offset by lower tax rates. That is in line with previous years, when Jindal shot down tax increases and supported new tax exemptions.

Shortfall due to lower revenue from natural resources, sales and income taxes

This year's shortfall is driven by projections of lower than expected revenues from a variety of sources. The sales tax is expected to bring $173 million less than estimated, royalties from natural resources are projected to be $64 million less and individual income taxes are expected to come in $49 million less than budgeted. Those estimates are offset to some degree by areas where the state is expected to outperform previous projections such as taxes on fuel and corporations.

Mid-year budget shortfalls under Gov. Bobby Jindal

2012 - 2013: $129.2 million
2011 - 2012: $198 million
2010 - 2011: $106.7 million
2009 - 2010: $247.9 million
2008 - 2009: $341 million

But Office of Planning and Budget economist Manfred Dix warned that he is uncertain about his projections for corporate taxes, which he estimated will come in more than two times higher than expected. That estimate is based on this year's collections, which came in well above predictions, but Dix said it is difficult to say exactly how much they will bring in.

"In some cases I feel like I'm in a casino betting blind on corporate collections," Dix said, noting that he had "no clue" whether the coming year will see a repeat of this year's windfall.

In making its forecasts, the Revenue Estimating Conference is presented with projections prepared by two economists: one from the governor's Office of Planning and Budget and one from the Legislative Fiscal Office. The members of the board chose to go with the administration's more pessimistic projection. The fiscal office estimated a shortfall of about $104.6 million this year.

"Things don't look very rosy, but I suppose we should go with the worse numbers and hope for the best down the road," Senate President John Alario, R-Westwego, said as he proposed using the more dire estimate.

The board -- made up of Alario, House Speaker Chuck Kleckley, Nichols and Louisiana State University economist Jim Richardson -- approved the new projection unanimously.

The new numbers suggest that this year, Louisiana will bring in roughly 1 percent less state revenue than last year.

Both Dix and Legislative Fiscal Office economist Greg Albrecht said their new projections did not take into account the impact of the budget stalemate in Washington, D.C. Should the country go over the so-called "fiscal cliff," a set of spending reductions and tax hikes that are set to automatically go into effect at the end of the year if an agreement is not reached, the state's budget situation could get far more dire.

Next year's budget gap grows to nearly $1.2 billion

The board also dropped its expectations for next year's revenue by $207 million. Combined with an already expected budget shortfall announced last month, that means the administration and lawmakers will have to close a nearly $1.2 billion gap when they get to work on the budget.

House Appropriations Committee Chairman Rep. Jim Fannin, D-Jonesboro, gave a grim assessment of the situation after Thursday's meeting and said he saw no sign that either sales tax or income tax revenue would be improving in the near future.

"If we are creating a lot of jobs, the only thing I can conclude is that those jobs aren't paying what the previous jobs were paying," Fannin said, noting that income and sales tax revenue wasn't increasing in the face of improving unemployment numbers and recent announcements of new businesses coming into the state.

Asked whether there was any place in the budget that could absorb the cuts, Fannin said, "I don't know if there was any fat left two or three years ago. But that didn't stop us from cutting based on the Revenue Estimating Conference forecast."

Source: http://www.nola.com/politics/index.ssf/2012/12/jindal_administration_to_annou.html

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