Louisiana Spotlight: Happiness over surplus tempered by shortfall

BATON ROUGE — A decade of near-constant financial problems has taught Louisiana officials to assume the worst, be leery of good news and always look to the next shortfall.

Perhaps that’s why the announcement that Louisiana closed the books on the last budget year with a surplus expected to top $100 million was greeted with only modest enthusiasm, rather than the eruption of trumpets one might anticipate.

Republican House Speaker Taylor Barras declared he was not ready to “pop the champagne yet.” GOP Senate President John Alario suggested everyone “take a deep breath” at the news. And Democratic Gov. John Bel Edwards called it “a positive step.”

One could question if Louisiana’s top leaders know how to celebrate.

But then again, the governor and lawmakers are staring at another looming budget gap that’s 10 times larger than the surplus — and news that $100 million-plus is on the table already has started disagreement about how to spend it.

State economist Manfred Dix told Louisiana’s income forecasting panel Thursday that tax collections, largely from better-than-expected sales and personal income taxes, exceeded revenue projections by about $140 million in the 2016-17 financial year, which ended June 30.

Dix warned the estimate was preliminary and unaudited, and still needed to be compared against spending levels. But after the accounting is completed, a surplus is expected.

Too bad that can’t bail Edwards and lawmakers out of next year’s problems.

The state faces a more than $1 billion gap in mid-2018, when temporary sales taxes passed by lawmakers last year expire.

Under Louisiana’s constitution, surplus dollars can only be spent on certain one-time expenses, like debt payments, construction work and coastal projects, not ongoing agency expenses and continuing programs. At least 10 percent of any surplus is supposed to pay down
retirement debt, and a quarter of a surplus is earmarked for the state’s “rainy day” trust fund.

Lawmakers could try to indirectly use some of the surplus money to help with the upcoming shortfall, by paying down debt early so they can spend fewer state tax dollars on debt payments a year later. But that would only be a short-term and small-dollar fix in the scope of the gap.

Edwards and lawmakers are locked in the same ongoing debate about whether to renew the expiring taxes, raise other taxes or make deep budget cuts that they’ve been having for the last year. No consensus has been reached so far.

Meanwhile, diverging viewpoints already have surfaced on how to spend the surplus cash during the next legislative session, which could shape up into another contentious fight in a Legislature riddled with divisions.

Barras wants to use more than the required 25 percent for the rainy day account, to repay the $99 million lawmakers took from the fund in a February special session to help close a previous deficit.

The savings account currently contains about $287 million. It was nearly three times that amount before it was repeatedly tapped by lawmakers during the tenures of both Edwards and former Gov. Bobby Jindal.

Use of the rainy day money was contentious in the February special session, with House GOP leaders resistant to tapping the fund, but Edwards and Senate leaders warning that refusal to use the money would force damaging, unnecessary cuts on programs and services.

Alario said he doesn’t want to rush into making decisions about the surplus, preferring to wait and see how the dollars fit into the larger financial picture. Edwards also hasn’t backed a specific plan for how he’d like to spend the excess, indicating he’d “consider” Barras’ rainy day fund replenishment idea. Other lawmakers are eyeing the dollars for roadwork and projects.

Beyond the immediate benefit of surplus cash to spend, the governor and lawmakers are hoping the better-than-expected tax collections mean Louisiana’s economy is on the path to recovery after being hammered by the oil and gas industry downslide.

But even there, the enthusiasm and expectations remain modest.

Edwards said the surplus shows “we are heading in the right direction.” Alario called it “a sign that our economy’s picking up somewhat.” And Barras said he’s hopeful it’s a “trend that can continue.”

Melinda Deslatte has covered Louisiana politics for The Associated Press since 2000. Follow her at http://twitter.com/melindadeslatte