State budget problems began long before drop in oil prices

State budget problems began long before drop in oil prices

NEW ORLEANS, LA (WVUE) - As Gov. John Bel Edwards prepares to issue his first executive budget while proposing cuts and tax hikes to overcome deficits for the current and coming fiscal year, it is clear the structural deficit problem began years ago.

"When we talk about a budget shortfall that's usually what we're talking about, is not state revenue enough to meet the expenses that it has to pay for," said Robert Travis Scott, president of the non-profit Public Affairs Research Council.

Edwards' administration said it inherited a much bigger funding shortfall than anticipated.

While Treasurer John Kennedy is not convinced the shortfalls are as serious as the new governor said, he does agree it is a serious problem that must be addressed. Gov. Bobby Jindal's administration was criticized by some for propping up budgets with non-recurring dollars.

"This will be the seventh year in a row that they've spent more money than they've took in. Now I know they say the budget is balanced, but for the past seven years it's balanced with smoke and mirrors and accounting gimmicks," said Kennedy.

According to data compiled by the House Fiscal Division, the budget for FY06-07 was $24 billion, FY07-08 was $27.8 billion, a time when federal Katrina recovery dollars were in play; FY08-09 was $25.2 billion, FY09-10 $24.7, FY10-11 was $25.4, $24.1 billion for FY11-12, for FY12-13 the budget was 24 billion, $22.9 billion for FY13-14, $25.1 billion for FY14-15, and for fiscal year 2015-16 the amount is $24.5 billion.

Scott said Jindal did cut spending and reduced the size of state government's workforce during his two terms in office.

"Unfortunately, the positive effect of that has not been robust enough to overcome some of these negative issues," said Scott.

So why is the budget in shambles? Of late, drastically low oil prices are a factor. But the problems began before then.

"Katrina brought us a lot of recovery dollars, a lot of people coming in to work and we just had this huge rush of money at the time and it gave us too much confidence that, that type of revenue stream for the state was going to continue," said Scott.

And because of all of the federal dollars flowing into the state at the time, state leaders at the time thought it fitting to reduce the tax burden by repealing the Stelly Tax Plan.

"The Stelly Plan was created over a long period of time to try to put in place somewhat of a progressive tax system that would help protect low income people, particularly in terms of sales taxes they were paying on food, prescription drugs, and that type of thing and to take the income tax and to change the brackets and the types of deductions you could take, so that it put a little bit more pressure on the middle class, and the upper class," Scott stated.

Edwards said he wants to cut spending even more where it is feasible. He is also proposing some tax hikes and reworking tax brackets. Kennedy said he has spoken to the governor about tax ideas that do not sit well with him.

"Here's what I've told our governor. Before we talk about taxes and the tax code we need to talk about the root of the problem and that's spending," said Kennedy.

In the remaining weeks before state lawmakers gather for the special session, there will be lots of discussion about how to solve the budget crisis. All the while, higher education remains on pins and needles.

"The state support has gone down now we're in a situation where the universities I think need some stability," said Scott.

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