For the sixth year in a row, the state experienced a downturn in the amount of revenue government expected to collect. Fortunately, this year’s adjustment comes with a positive spin to the sluggish cash registers and disappointing business tax collections.
Officials downgraded the $25.4 billion state spending plan by $35 million Wednesday.
Hours later, the Jindal administration presented a proposal for tackling the shortfall without cutting into health care or other public services.
Unexpected dollars paid by taxpayers through an amnesty program should fill the gap.
“No midyear cuts,” Commissioner of Administration Kristy Nichols said after an hourslong meeting of the Revenue Estimating Conference.
The amnesty dollars are a silver lining for a revenue drop driven by disappointing corporate and sales tax collections.
Midyear reductions have become an annual event in state government, resulting in proposed cuts to sensitive areas such as hospice care.
Last year marked the fifth year of budget cuts in the middle of the fiscal year since Gov. Bobby Jindal took office.
On Wednesday, officials had more difficulty navigating through the weeds of state government fiscal rules than resolving the revenue drop.
At one point, a Senate aide told Nichols that she needed to rework a complicated motion.
Nichols called a 30-minute recess so she could come to an understanding on what was allowable under new rules governing the panel’s actions.
The break gave officials time to stretch, eat and resolve problems that arose during a four-hour meeting. Nichols used the recess to study documents with an aide and refuel with Cheetos cheese snacks after the meeting stretched through lunch.
The Revenue Estimating Conference is tasked with deciding how much money state government has available to spend. The projections stem from economists’ competing projections on how much the state will collect from sales taxes, income taxes and other revenue sources.
The numbers generally fluctuate throughout the year. It’s up to the REC — comprising Nichols, the House speaker, the Senate president and an LSU economics professor — to pick a projection.
One economist predicted a $35 million downturn. Another economist was more pessimistic, estimating revenue projections would fall short by $87 million in the current state spending year that ends in June. State officials adopted the more optimistic forecast.
This year, state officials had to pore over pages of projections on statutory dedications ranging from a sweet potato pests and disease fund to a public defender account.
They also had to divvy up dollars and put them under one of two categories: recurring or nonrecurring.
The amnesty program posed problems for state officials.
Last year, legislators decided to give taxpayers an incentive for paying back taxes or resolving differences over taxes. The state waived half the interest and all penalties for taxpayers who agreed to settle tax disputes or clear back taxes between Sept. 23 and Nov. 22.
The tax amnesty program generated millions of dollars in cash — mostly from businesses — for state government. Some of the money already is earmarked for health care and other expenses. Roughly $100 million in remaining dollars represent lagniappe.
Economists Manfred Dix and Greg Albrecht said the program likely will negatively affect the state’s corporate tax base. “We’re getting them all (payments) now. That’s the suppression,” Albrecht said.
State Revenue Secretary Tim Barfield said mitigating factors also need to be considered. “The earlier you collect a debt, the more you collect,” he said.
State Senate President John Alario, R-Westwego, said the program may have brought people back onto the tax rolls. Albrecht disagreed, saying the program likely just accelerated future payments from businesses already on the tax rolls.
Sales tax collections also are worrisome. Both economists added a downturn from their May projections.
House Speaker Chuck Kleckley, R-Lake Charles, suggested people are flocking to the Internet, which sometimes offers the bonus of tax-free shopping. Kleckley said shoppers also might be crossing the border into neighboring states to make purchases.
Dix said the Internet might explain part of the downturn. However, he said he is not convinced that it is the entire explanation.
“We’ve got income (and) employment growth, and we don’t have spending,” Albrecht said. He said residents either are holding back on making purchases or spending their money out of state.
After the meeting ended, Nichols’ office released a plan for dealing with the shortfall. Legislators will be asked next week to authorize the use of amnesty money in order to avoid budget cuts. Jindal also ordered a hiring freeze with exclusions for certain areas of state government such as public safety.