Economists with the state and LSU have identified several reasons for the current revenue shortfalls facing the state this year and next.
Drop in oil prices
Though oil revenues make up just 15% of the total state budget, compared to 45% in the 1980s, every $1 drop in the price per barrel of oil equals a loss of $12 million in state revenues.
Slump in corporate income taxes
The state’s corporate income tax collection was –$200 million in 2015, meaning it awarded $200 million more in tax credits than it took in. Experts attribute the phenomenon to the fact that the Legislature in 2015 cut back on many business tax credits, so companies took their credits early in the year and used them.
Slowing sales tax collection
Though the economy in the Capital Region remains healthy, collection of sales taxes—which comprise one-third of state revenues—continue to decline from their immediate post-Katrina levels.
- Major cost increases to Medicaid, MFP, TOPS and state prisoner housing in recent years that continue.
- Increase in tax credits and exemptions, which have grown by more than $1.1 billion since 2012. In FY 2012, there were more than 400 valued at $7.7 billion.
- Continuing fallout from the partial repeal of the Stelly Plan in 2007-2009, in which income tax increases were repealed but not the offsetting sales tax exemptions.