The current year’s deficit isn’t $750 million, apparently. Now the experts say it’s $870 million.
“For all practical purposes, Louisiana is in its own recession,” said Greg Albrecht, the Louisiana Legislature’s economist that predicts the state’s tax collections.
The even-larger-than-expected problem means the budget cuts and tax increases being considered to solve Louisiana’s budget crisis may have to be more aggressive than originally proposed.
Next year’s budget shortfall also looks bleaker than originally projected. The state is now projecting a $2 billion hole in the next fiscal cycle, higher than the $1.9 billion figure Edwards has been using for the past several weeks.
The Louisiana Revenue Estimating Conference — a panel of legislators, members of the Edwards administration and one economist — met Wednesday (Feb. 10) to determine the official size of the deficit for this year and the budget shortfall for next year.
If you want to believe the Revenue Estimating Conference, that is. And here’s why you probably shouldn’t…
The group had to choose between two budget deficit estimates: either a $570.1 million or a $632 million budget hole for the current year. They went with the lower — and slightly easier to solve — estimate of $570.1 million.
Additional shortfalls in the current budget — Medicaid, TOPS and elementary and secondary schools — must be factored into the overall state deficit that has to be addressed in the next five months. Legislative staff says deficits in those programs total $300 million overall, which is how the state gets to an overall problem of $870 million that must be solved by June 30.
Can’t blame them. $570 million sounds better than $632 million, right?
The budget is where it is because oil and gas are down the tubes. And because sales tax revenues, affected in large measure by the negative effect the oil and gas decline has had on the state’s economy, are down the tubes. And because income tax revenues – ditto – are down the tubes.
Louisiana’s economy, in its current state, can’t support a $25 billion budget. It can support a $23 billion budget, but not a whole lot more.
The loudest screaming comes now from those who decry the exemptions and breaks from the state’s corporate income tax. Louisiana is actually losing a half-billion dollars a year on having a corporate income tax because the breaks and exemptions it’s giving out against that tax are larger than the revenues.
The Left wants to get rid of all the corporate tax breaks. Here’s a sample of the screaming from a former Louisiana Democrat Party official…
Of course, getting rid of the corporate income tax altogether, along with the breaks and exemptions that go with it, would move the state’s budget $500 million toward the black. Let’s remember the breaks and exemptions were put in place for a reason, and it wasn’t because the corporations hired lobbyists. Those breaks and exemptions were passed because next door in Texas there is no corporate income tax, and Texas has been kicking Louisiana’s ass economically for decades largely thanks to that fact. The breaks and exemptions were put in place in an effort to keep jobs and capital from decamping to the west.
Without the tax, those exemptions and breaks could all go away and the state could claim to be more economically competitive. Particularly in the case of small businesses, who don’t have the money for lawyers, lobbyists and hotshot accountants to dig up all the tax breaks they can find. Small businesses would rather just know that they don’t have to pay a corporate income tax in Louisiana, and might like to set up shop here even without catching a sweetheart offset to an uncompetitive tax scheme.
You will not hear anyone from the state’s Democrat Party entertain the idea of killing the corporate income tax and all the breaks and exemptions that go with it, however. You would think that the popularity of an idea of a tax cut that immediately saves the state $500 million would be irresistible for politicians of any stripe, but you’d be wrong.
Instead, we’re going to get…something else.
Also Wednesday, Governor John Bel Edwards announced he’ll address the budget crisis in a presentation Thursday evening.
“The challenges facing Louisiana are so severe, and the risk of doing nothing is so big, that it is important for me to outline these problems directly to the people,” Gov. Edwards said. “I promised to be open and transparent with the people of Louisiana and give them the facts, and that’s what I intend to do. There are some real consequences if we do not work together to solve the state’s financial problems and I want to personally communicate them to the citizens of our state.”
That’ll surely be a hoot. Our new governor will take to the airwaves to passionately tell Louisianans whose personal finances are in a tailspin that he needs $2 billion in tax increases from them. Because as we all know, the way to pull out of a recession is to drain the private sector of even more capital.
It’s like the old joke goes – “the beatings will continue until morale improves.” Louisiana’s economy can’t support the current size of government, and is losing ground to other states. So that means we must burden the state’s economy even more to support the unsustainable size of government.
Sounds like a great plan, doesn’t it? Just wait until Edwards lays it out tomorrow.