State Capitol

Newell: What to do with Louisiana's "Katrina-sized" budget hole?

Newell Normand
May 12, 2020 - 9:57 pm
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Louisiana officials are coming to terms with a Katrina-sized, billion-dollar budget shortfall thanks to the economic crisis brought on by the coronavirus pandemic. Newell invited Commissioner of Administration Jay Dardenne onto the show Tuesday morning to discuss that as well as the economic recovery plan outlined by Governor Edwards on Monday.

“Jay, the Revenue Estimating Conference met and voted to adopt a revenue forecast that’s about a billion dollars lower than the previous forecast - one of the interesting comments they made is that they were highly uncertain in their projections. I guess that just continues to reveal itself!” Newell began.

“They really all but acknowledged it,” Dardenne said. “I said yesterday, it’s really more like the Revenue Guesstimating Conference now because this really is a guess. We’ve always talked about the fact that our budget is an estimate, because you never know how much tax revenue any entity is going to get in a given time period. Both the economists from the division and the economists representing the legislative fiscal office acknowledged they are in uncharted waters here. OUr situation spans two fiscal years, which is a little unusual because a lot of states start their budgets with the calendar - so they had just started a new fiscal year right as the pandemic hit. Ours ends on June 30 and a new one begins, so our billion-dollar problem spans those two budget years and that gives us an opportunity to allocate some of those Federal dollars that are coming our way and deal with the hole this year, as well as a large projected hole for the next.”

“SAles tax collections are expected to fall north of $300 million, severance taxes north of $300 million, rowboat gaming about $172 million,” Newell continued. “We always talk about this restricted and unrestricted revenue that goes to the general fund. Can you put in perspective what kind of hit this is to the general fund?”

“About a third. When you get right down to what the state can actually spend, what the legislature has the prerogative to actually spend, that’s between $3-4 billion,” Dardenne said. “And this has a disproportionate impact, as always, on budgets for health and higher education.”

“That highlights the importance of the relaxation of the rules for the $1.8 billion that the state has taken from the Feds - has that process moved along at all?” Newell asked.

“It has. When we originally saw the results of the CARES Act, the one glaring point was that you cannot use this money to replace lost revenue. And that’s the biggest hit the state has taken, and clearly it's the biggest hit that local governments have taken as well, but you can’t use this money for that. That’s being discussed in Congress now and perhaps in a subsequent appropriations bill it will be addressed. But what the guidelines have told us is that you can use CARES money to reimburse any expenditures related to the virus, which includes regular and overtime pay for a lot of personnel working for the state in healthcare and public safety.”

Hear the entire interview in the audio player below.

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