State embarks on lowering largest deficit in history
A three-week special legislative session began on Feb. 14, where Louisiana law makers are discussing how to handle what is now an expected $957 million deficit – the largest deficit in state history.
In his public address on Feb. 11, Gov. John Bel Edwards was very frank.
“I don't say this to scare you,” he said. “But I am going to be honest with you. No more tricks. No more smoke and mirrors.”
Edwards also pointed to education saying that the Louisiana TOPS scholarship fund is now so depleted, that if the legislature does not raise revenue, fewer high school students will receive awards and current recipients are in jeopardy of losing their existing scholarships for next year.
Just before Edwards’ address, the Louisiana Office of Student Financial Assistance (LOSFA) suspended TOPS payments to post-secondary institutions out of precaution due to the possibility of budget cuts. Following Edwards’ address, LOSFA received clarification that the $28 million cut to the TOPS scholarship fund would be absorbed by each individual college or university.
LOSFA will resume its regular weekly TOPS payment processing on Feb. 18. The agency will allow post- secondary institutions to continue billing and LOSFA will pay up to its appropriation. The appropriation to LOSFA is sufficient to pay 80%. Colleges and universities will absorb 20%.
The impact to TOPS funding for the 2016-2017 academic school year will be determined by the outcome of the legislative sessions. Proposed items include raising the minimum ACT score to 28 and making the scholarships income-based.
“Even with additional revenue, higher education this year will need to cut $42 million,” Edwards said in his address. “However, if there is no new revenue raised this year, higher education will face catastrophic cuts over the next four months. And that comes on the heels of the largest disinvestment in higher education in the nation over the last eight years.”
Edwards pointed to his predecessor, Gov. Bobby Jindal, who inherited a $1 billion dollar surplus when he became governor.
“I've been left with almost a $1 billion deficit for this year alone, and a $2 billion deficit next year.
For seven years in a row, the state has had growing budget deficits.Year after year, the previous administration made temporary fixes using one-time funds to patch recurring expenses, knowing that eventually the well would run dry. And it has.”
Edwards said that the deficit is comprised of two parts – a $570 million shortfall of the revenue the state originally expected for the year. Estimated by the Revenue Estimating Conference – the panel of economists and financial experts on which the legislature relies – the problem is due, in part, to the drop in oil prices and a slowdown in sales and corporate tax collections. The other part is $370 million dollars in commitments made without funding.
“To stabilize our state's budget we should not shy away from the fiscal right sizing that is needed. For me ‘right sizing’ requires that we get both the spending and revenue right. Focusing on one without the other would be irresponsible.”
Shortly after Edwards’ address, the Louisiana Federation of College Republicans State Chairwoman, Sarah Bryson, sent out a statement condemning what she referred to as Edwards’ tactics to further his political agenda.
“After promising to not raise taxes during the Gubernatorial election last fall, John Bel Edwards and his administration have put the future of Louisiana’s college students into the hands of party politics,” Bryson wrote. “By abruptly suspending TOPS scholarships, Governor Edwards is attempting to strong-arm elected representatives into supporting his plan to raise taxes on working class Louisianans. Our college students should not be forced to suffer due to the refusal of this administration and some legislators to make real spending cuts and budgetary reforms, like ridding our state Constitution of its ‘sacred cow’ dedications. This plan is short-sighted and Louisiana will not win in the end.”
On Feb. 12, two days before the start of the special session, District 59 State Rep. Tony Bacala took to his Facebook page, writing that he does not think the state is on the verge of collapse, but just needs adjustment. Bacala said he received nearly 100 emails and 20 phone calls on the heels of Edwards’ public address.
“People expressed fear and concern about the future of TOPS and possible tax increases, and they also lamented about excessive spending on social programs,” Bacala wrote. “First, TOPS will continue to be with us for years to come. In reality, last year state government underestimated utilization and cost by a small percent. I fully expect this to be fixed without any major changes to the program.
Second, many of us in the Legislature are committed to making budget cuts as a means of narrowing, and possibly eliminating, the budget gap.
Finally, over half of the state budget is dedicated to social programs such as welfare and Medicaid. I am fully committed to providing for the elderly and disabled, but much of the money goes to neither. We need to re-evaluate all of our social programs and only fund those that are reasonable and necessary.
A budget crunch now and then can be healthy. It will make us truly examine how our tax dollars are being spent and in the end, we should emerge with more efficient and responsible government.”
To start the special session, Edwards explained his budget plan which includes significant spending cuts to the tune of more than $160 million, in addition to a hiring freeze across state government and a reduction in state contracts.
“I also propose to use $128 million from the rainy day fund and $200 million in non-coastal BP payments to the state to reduce the current year deficit.
My proposals include further reducing tax credits, suspending corporate tax deductions, and adding one penny of sales tax to our state’s four cent sales tax. I am proposing this penny as a bridge that will give us time to stabilize and restructure our state’s tax code. When that restructuring is complete, this penny sales tax will be removed.
As a part of this restructuring, I am also proposing an increase in alcohol and cigarette taxes.
I’ve heard the critics say I’ve changed my tune on raising taxes. My response is this – in a crisis when the facts change as dramatically as the facts surrounding our budget have, so must the solutions change. That is called responsible leadership.
So, if you insist on saying that I never said I would raise taxes – that I’m going back on my word – that’s fine. Say it. Get it out of your system, and then please come back here ready to work with me to do the job we were all hired to do.
As Louisianans, we’ve weathered many storms together. This one will be no exception. As I said Thursday night, our best days are ahead.”
As of Feb. 15, state lawmakers have already cut the deficit by $60 million.