During March, Governor Jindal submitted the outline of his executive budget. He touted the fact that, under his plan, health care and education would not be cut any further and no taxes would – under any condition – be raised. After enduring the turmoil of the redistricting session, many legislators probably hoped that the budget problems could be handled as the governor outlined in his executive budget with no need to cut education or health care or to raise taxes as an alternative.
It now appears that, instead of a relatively easy fix to the budget crisis, more wailing and gnashing of teeth is on the horizon.
Governor Jindal’s executive budget was predicated on the use of more than $400 million in one-time revenue to plug the budget hole. Soon after he released his budget outline, the sources for those funds started to come under fire.
Part of his plan was to sell state prisons to private firms and then use the proceeds of the sales to help address the deficit. That plan met with such strong opposition from legislators that the governor had to back off of it. He said he would wait to see if the Revenue Estimating Conference’s (REC) new estimates later this month would result in enough new revenue to obviate the need for the prison sales.
The governor’s plan to sell or privatize the group health insurance program – another potential source of new revenue – is also meeting with strong legislative resistance. Another pot of money the governor plans to use would utilize funds from a reallocation of Millennium Fund financing for TOPS. There isn’t much push-back from legislators on that approach, but it would require a constitutional amendment to be approved by voters in the fall. That would create a problem for the funds to be included in the budget now under construction.
Many state officials hope that there will be good news on the revenue front when the REC meets in a few weeks to set the revenue estimates for the new budget. That may well be a false hope, however. For example, it is possible that corporate income tax revenues will not perform near the levels projected. In addition to a soft economy, last year’s tax amnesty program encouraged companies in tax disputes with the state to agree to settlements that generated more money in the current budget but quite possibly took it away from future budgets – including next year’s. This is just one example of what could go awry.
If the governor’s projected use of one-time revenues doesn’t materialize as planned and if there is no partial rescue from the REC, the reality is that there must be either cuts or revenue increases. Governor Jindal has stated as forcefully as humanly possible that he will not allow the budget to be balanced with tax increases. If that is the case, there will have to be cuts – and significant ones.
By the time the Regular Session ends, the blood bath that legislators endured during the redistricting session might appear in retrospect to be a walk in the park compared to the budget turmoil they soon will face.
(Dan Juneau is president of the Louisiana Association of Business & Industry.)