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Story Archives: Revenue forecast delivers bad tidings
|Revenue forecast delivers bad tidings|
The less-than-rosy financial picture the state Revenue Estimating Conference painted earlier this week came as no surprise.
At least that was the word from Gov. Bobby Jindal, whose administration officially learned state revenues in the current fiscal year are running about $341 million less than expected. That means Jindal and company must cut some $341 million from the current fiscal year budget, which began July 1 and runs through June 30, 2009.
The sour financial note the REC rattled off about the state's current financial position wasn't the only bad news the governor and the Legislature as well learned at the capitol on Monday.
The other foot that dropped, or the other bit of bad news, was word that state revenues are expected to come in at about $2 billion less than expected in the 2009-2010 fiscal year. That's the whopper.
Trimming $341 million from a roughly $30-billion budget will seem like a walk in a park compared to finding $2 billion in savings, or cuts, which Jindal and the Legislature must accomplish in the next Regular Session. They have no choice. The state Constitution says the budget must be balanced.
Though we've been told for years the state treasury is not as dependent as it once was on severance taxes generated by the oil and gas industry, the fact remains the state is very much dependent on robust activity in the oil patch. For every $1 drop in the price of a barrel of oil, the state can say goodbye to some $10 million in tax revenues. A few months ago, oil was trading for $140 per barrel, give or take a few dollars. It stands at roughly $45 per barrel today. Do the math.
While the price of oil has plummeted as of late, a slow down in the global economy hasn't help matters either as far as state tax revenues are concerned. Layoffs at the International Paper companies of the world are an example of the fallout we can expect here in the Sportsman's Paradise as our friends and neighbors across the country and beyond grapple with a sluggish economy. Everyone is paying a price.
Yet, in the coming months, we can expect to hear how hard our state lawmakers and the governor and his administration are working to maintain the level of services the people of Louisiana expect Baton Rouge to pay for year in and year out. After all, no one likes to cut state spending and no one wants to pay more taxes.
The sad irony of it all, though, points to areas of the budget in which the governor and state lawmakers will focus their attention when they tweak the budget to balance it. Those, areas, or expenditures, are earmarked for education and health care, the two big chunks of the budget, which are not protected by the Constitution. In other words, roughly two-thirds of the budget is constitutionally mandated. Thus, the one-third of the budget state lawmakers and the governor can slice and dice are education and health care, or expenditures for our future.
Let us be reminded, though, that some five years ago the state budget totaled some $24 billion. It's $30 billion today.
Much of the growth in state spending was the result of increased expenditures for recovery efforts in the wake of the 2005 hurricanes. A boat load of money thanks to the federal government was involved in the mix.
Those federal funds are gone now. So too are most of the demands for those resources.
But the state budget remains bloated.
At least for the time being it is.