COVID-19 will put $1 billion hole in state revenue

BATON ROUGE — Louisiana’s revenues are expected to drop by $1 billion or more due to the coronavirus, threatening cuts to services in the fiscal year starting July 1, state economists told the Revenue Estimating Conference Monday.
The four-member group adopted the lower forecast, which could translate into a 10 percent cut in the state’s discretionary funding, as Louisiana grapples with high levels of unemployment, falling oil prices and business closures because of the pandemic.
“There’s no crisis we’ve had that even comes close to this,” said Greg Albrecht, the Legislature’s chief economist.
The economists released their estimates shortly before Gov. John Bel Edwards announced that the state will be entering the first phase of the reopening process on Friday. He said he would loosen restrictions on businesses such as restaurants, gyms and salons. These businesses, along with churches, will be allowed to operate with 25% occupancy. However, bars, amusement parks and tattoos parlors will remain closed.
Even so, Albrecht projected a $867 million loss in general tax collections in the next fiscal year and about $165 million in tax and fee dollars for specific agencies.
Health services and higher education are typically the most vulnerable to budget cuts because they are not protected by mandated spending laws.
Falling oil and gas prices are responsible for much of the damage. Albrecht and Manfred Dix, the chief economist for Governor Edward’s administration, projected oil prices to be between $28 to $32 a barrel.
In addition, the projection calls for revenues to decrease by $362 million in the current fiscal year, with $123 million of that total coming from the state’s general tax collection.
Albrecht and Dix said they are highly uncertain of most of their estimates, since the data is distorted because of the coronavirus. It is difficult to determine how people will react once businesses do reopen, they said.
“People have to feel comfortable going out,” Albrecht said, “I don’t think people are going to be real comfortable for a while.”
The Revenue Estimating Conference is composed of Senate President Page Cortez, R-Lafayette; House Speaker Clay Schexnayder, R-Gonzales; Commissioner of Administration Jay Dardenne; and Stephen Barnes, an economist at the University of Louisiana at Lafayette.
Meanwhile, the House Ways and Means Committee on Wednesday voted 11-5 to suspend several taxes on the oil and gas industry for a year to help the businesses recover. Opponents questioned if that is wise given the budget hole that the state is in.
The state’s total budget is usually around $30 billion and includes roughly $20 billion in federal aid and $10 billion or so raised through state taxes and fees.
Edwards and state Republican leaders have called on Congress to pass a bill that would supply at least $500 billion to states around the country to help them recover from the economic impact of the virus.
President Trump and Senate Majority Leader Mitch McConnell have both expressed reservations about doing that.