Jeremy Alford says there simply aren’t enough candy canes in the North Pole to sugarcoat the harsh reality that is the state’s finances, which are worsening with each passing month.
“Like Santa inching his way down the chimney seemingly unaware of the roaring fire below, lawmakers and the administration are approaching a 2015 session that will most certainly glow white-hot,” Alford writes in his latest column.
Alford says there’s a good chance the $1.4 billion budget hole that the state already faces for the 2015-16 fiscal year will swell even further over the next few months, especially if oil prices continue to plummet. He notes that when the Revenue Estimating Conference—the panel charged with determining how much money the state has to spend—upped the expected shortfall to $1.4 billion in mid-November, oil prices were a major culprit.
“The original forecasted price for this year and next was initially set at around $95 per barrel, when prices were clocking in at $105, but was readjusted by the REC last month to about $82 to match the market,” Alford writes. “The importance of that shift cannot be overstated. The state loses $12 million for every $1 decrease from the forecasted price. So you can imagine the shock that must have shot through state government as the price of oil dropped to $56 over the weekend, less than a month after the REC’s decision.”
If the expected budget shortfall does grow, Alford says, more mid-year cuts to the current budget may be needed.
“While a plan to address current fiscal year cuts is in the works, the administration contends it already has a way to whittle down the $1.4 billion budget shortfall for next year to $1 billion or less,” Alford writes. “The latter includes various cost savings, a hiring freeze, pulling back spending, surplus money from the previous budget and other pots of money that can be utilized. Once the administration gets over that hump, though, the going gets tough.”
Jeremy Alford publishes LaPolitics Weekly, a newsletter on Louisiana politics, at LaPolitics.com. Follow him on Twitter, or on Facebook. He can be reached at JJA@LaPolitics.com.
