The state had relatively solid financial footing, without massive budget gaps, for the financial year that begins July 1. Lawmakers generally just needed to set spending priorities and determine what they could afford. Those are the basic decisions expected of the legislative branch, which holds the state’s purse strings.
But lawmakers’ philosophical, partisan and personality divides made even those straightforward choices tough. And for the first time in 17 years, they failed to finish an operating budget in their regular legislative session, costing taxpayers extra money so they could go into overtime.
If it was this much of a saga to create a 2017-18 spending plan, haggling over the next one is certain to be a mess, with lawmakers staring down a budget gap estimated to top $1 billion for the 2018-19 fiscal year.House Appropriations Chairman Cameron Henry, a Metairie Republican, summed it up succinctly, at one point telling lawmakers in the just-ended special session that dealing with the next year’s financial troubles “will make this budget process look like Disneyland.”
After it became clear lawmakers wouldn’t raise any new revenue with taxes for this latest budget, the divide largely centered on one question: How much should the state spend?
At issue was the state income forecast. When revenues come up short of the income projections, agencies are forced to make midyear cuts. Louisiana has had 15 midyear deficits over the last nine years because the income forecasts have repeatedly been too high.
House Republican leaders wanted a different approach that wouldn’t allocate every dollar available, but would instead leave some money unspent so if the income forecast is too high, they’d have a cushion to possibly avoid cuts.
Democratic Gov. John Bel Edwards said he thought it was a worthwhile approach — but not until sometime in the future when state agencies were on more solid footing. House Democrats and most of the majority-Republican Senate agreed with Edwards.
Budget haggling across more than two months centered on that dispute. Enough moderate Republicans in the House eventually bucked their leaders that the Senate and the governor won the fight, with all the dollars allocated in the final version of the spending plan that begins in two weeks. In a compromise, the Edwards administration agreed to withhold $60 million from agencies as a deficit-avoidance measure.
The next financial dispute already looms.
Another special session is planned over the next eight months (an exact date hasn’t been set) for lawmakers to consider raising taxes before Louisiana hits what is called the “fiscal cliff.” That’s when temporary sales taxes expire June 30, 2018 and leave a budget hole estimated to be as much as $1.3 billion or more.
In the regular session, the conservative House blocked all tax hikes to offset the financial hole. Senators who have shown more willingness to raise taxes could do little.House Speaker Taylor Barras, a New Iberia Republican, said he thinks lawmakers will be more likely to consider tax measures when they near the tax expirations, after they’ve determined if other state revenue sources have improved and what size hole they face.
No legislative leader has suggested the entire mid-2018 gap can be closed with cuts. But Barras lamented that lawmakers didn’t pare back spending in their just-completed budget, to help lessen expenses long-term.
“I think our intent was to, from a reform perspective, get the fiscal cliff to (a smaller) level,” Barras said of House GOP leaders. “It was clear from our negotiations with the Senate that they wouldn’t accept any level of cuts.”
Senate leaders and the Edwards administration said stripping available dollars out of the budget would make unnecessary and harmful cuts that could damage critical services.
Lawmakers will face the same debates in that next special session as they choose between cuts and taxes.
Senate Finance Chairman Eric LaFleur, a Ville Platte Democrat, said he doesn’t think lawmakers will allow programs and services to be decimated.
“When we have one finger on the edge of the cliff we’re hanging on, we will do the right thing,” LaFleur said. “We’re not very proactive. We’re very reactive.”