What's Next for the Louisiana Budget Crisis?

Date: January 31, 2017

The 2017 regular legislative session doesn’t convene until April 10, but Louisiana’s ongoing budget fiasco may mean Gov. Edwards will call lawmakers to Baton Rouge for a special session sometime between Valentine’s Day and Mardi Gras (Feb. 28).

Thanks to the state’s poor economy and unemployment, tax revenue from businesses, individual income, and sales continues to fall below expectations. The state’s midyear budget shortfall (for the current fiscal year that began July 1) is not quite as high originally thought—$303 million rather than $313 million, as announced earlier in January—but may still be big enough to trigger a special session. Some lawmakers believe a special session isn’t necessary, but Edwards and Jay Dardenne, state budget chief, have said that a special session opens up more parts of the budget, some of which can’t be cut without a full vote from the Legislature.

It’s the 15th such revenue gap in nine years, and it comes on the heels of a $300+ million budget gap for the fiscal year budget that ended June 30, 2016. By law, the Legislature had to plug that hole and did so by making cuts to education, postponing Medicaid payments, and instituting hiring and spending freezes.

Options for fixing the current budget deficit include:

  • Using $119 million (the maximum allowed) from the state’s rainy day fund
  • Raising income tax rates and changing deductions allowed
  • Expanding sales tax to currently exempt services and goods
  • More spending cuts

The problems don’t stop this year, either. The 2017-2018 fiscal year beginning on July 1 is projected to have a $400 million deficit, and the 2018-2019 fiscal year will include expiration of $1.5 billion in temporary tax hikes passed in 2016.

If consensus isn’t reached on correcting the state’s fiscal problems, Gov. Edwards may push to call a constitutional convention, which hasn’t been done in 25 years. Certain constitutional protections exist for several areas of government spending, and the governor and Legislature cannot make cuts. A convention would open up more structural changes for discussion

Related Content: Small Business News | Economy | Louisiana

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