Friday, June 11, 2010

State budget in turmoil; revenues lower than expected

The state budget, HB 1 by Rep. Jim Fannin (D-Jonesboro), is bogged down in the Senate Finance Committee, and there is no clear picture of what the budget will actually look like after the session ends on June 21.

As proposed, the $25.4 billion budget includes deep cuts for higher education, health care and a number of other state responsibilities. But as reported in the May 21 edition of the Weekly Legislative Digest, the Senate and House of Representatives are at loggerheads over resolving a shortfall facing the state in the current budget year.

The stumbling block is over use of the state’s “rainy day fund” to shore up the budget. While both sides want to use the fund to avoid a constitutionally prohibited deficit, they disagree over how and when the funds should be repaid.

The situation grew murkier on Friday, when the state’s Revenue Estimating Conference met to announce yet another shortfall in state revenues. With just two weeks left in the fiscal year, state economists said that revenues have fallen by another $261.4 million this year.

The state already cut this fiscal year’s budget by $200 million last December, and by another $319 million in April.

Leading the most recent decline in estimated revenues is a $250 million shortfall in collection of personal income taxes.

As Greg Albrecht, chief economist for the legislative fiscal office, said, “Obviously, we have been dramatically wrong this year.”

That set up yet another confrontation between the House and Senate. Speaker of the House Jim Tucker (R-Terrytown) said the Revenue Estimating Conference should not accept the economist’s report until the end of the year, and use some constitutional sleight-of-hand to pay back the deficit in the coming year.

Senate President Joel Chaisson (D-Destrehan), on the other hand, said the constitution does not allow a deficit, and recommended that the conference recognize the shortfall, which would require more cuts over the next couple of weeks.

Because decisions by the Revenue Estimating Conference must be unanimous, the issue was left hanging at that point.

The Senate Finance Committee will continue its discussion of HB1 next week.

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