Bobby Jindal’s Division of Administration announced that it was going to submit a plan to fix the deficits that are already developing in the budget approved this summer. Now that Bobby Jindal is done traveling the country, it’s nice to see them finally tackle the budget crisis.
Anyway, the budget deficit is being blamed on three things:
- The low price of oil
- Tax collections not generating the expected revenue
- Shortfall in income and sales tax collections
The estimated price of a barrel oil the Revenue Estimating Conference was working with was $61.70. That amount was absurdly high and the REC does this every year. The range of a barrel of oil has been $40-$50. The state is short $80 million. One reform that needs to be done is that we should try to have a realistic projection on the price of oil. The Jindal administration didn’t even try to change this, so we have this same dog and pony show every year.
Next up and the biggest factor was that tax collections were not keeping up with projections. This past session, John Bel Edwards, along with a lot of his fellow Republican and Democrat legislators, voted to raise taxes by around $700 million. Bobby Jindal signed these tax increases into law. The state was hoping to collect $790 million, however it has only collected $588 million. One of the reasons why is that corporations are getting more tax credits than usual by filing amended returns to take advantage of tax credits that were previously in place.
John Bel Edwards says he will balance the budget by “focusing on tax giveaways.” Edwards hasn’t announced what government programs and agencies he will cut. He also has ruled out closing one of Louisiana’s 14 four-year universities. However, he is pledging to spend more money on everything from K-12 education to highways. Since we already know that the tax increases will not generate the money that is expected, there is no way John Bel Edwards will ever balance a budget.
The last reason the state says they have a shortfall is because the oil price pinch is impacting income and sales taxes. That means the economy in Louisiana is slowing down. Given that John Bel Edwards has voted to raise taxes by over $725 million throughout his career, it’s clear he would look to force Louisianians to pay more. This would hurt Louisiana’s already fragile economy even more.
The Jindal administration will present its deficit reduction plan on Friday to the Joint Legislative Committee on the Budget.