Legislature Brokers Mid-Year Budget Deal Just Hours Before Deadline; Administration Rolls Out FY2018 Budget Proposal
After 10 days at the Capitol, the House and Senate negotiated a compromise that allowed the Legislature to adjourn Sine Die several hours before the midnight deadline. Earlier this month, Governor John Bel Edwards issued the call for a special session to address a $304 million Fiscal Year 2017 mid-year shortfall.
Yesterday, the House voted 92-9 to pass Senate President Alario's SCR 2, which will draw down $99 million from the state's Rainy Day Fund - a figure $20 million less than requested by the Governor but $24 million more than proposed by the House.
The House also voted 97-4 to adopt the conference committee report of Representative Henry's House Bill 3 to make roughly $85 million in reductions and balance the remainder of the deficit with changes in financing and other efficiencies. The Senate also voted 34-2 to adopt the conference committee report for HB 3
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The final piece of legislation negotiated in the compromise was House Speaker Barras' HCR 1, which would direct the Treasurer to immediately begin the process of allocating funds from certain constitutional and statutory dedications to pay a share of state debt service. The Senate adopted the resolution yesterday on a vote of 29-7.
In short, the budget balancing plan will spare K-12 schools, higher education, TOPS, the Department of Corrections, and the Department of Children and Family Services from any reductions. The final plan will reduce funds in some health programs, the Attorney General's Office, the Department of Agriculture, and the Legislature's own budget, among others.
The Legislature will re-convene for the 2017 regular session on April 10th, where comprehensive fiscal reform will take center stage.
Kicking off that debate today, Commissioner of Administration Jay Dardenne presented the Governor's proposed budget for Fiscal Year 2018. While tax revenue is projected to be higher than the current year, the Commissioner reported the state remains in a deficit due to ongoing spending requirements. The Governor's proposed budget does not fully fund TOPS or the public-private hospital partnerships, nor does it meet the required state match for road projects.
The table below from the Governor's Executive Budget
illustrates the dramatic growth from Fiscal Year 2016 to Fiscal Year 2018 in nearly every category of revenue: state taxes and fees, statutory dedications, and federal funds. Even in a struggling economy, state taxes are up from $7.9 billion in 2016 to $9.5 billion in 2018 largely as a result of the increased taxes passed last year.
Still, Commissioner Dardenne reported today that to fully fund state services, the state would need an additional $441 million.
As we prepare for the regular session, LABI will continue to analyze the growth in the state budget and offer solutions that will do no further harm to the economy, will force long-term spending changes and stability, and lead to better prioritization of state tax revenue.
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