At the Aug. 14 meeting of the State Revenue Estimating Conference we learned revenue predictions from oil revenues for the current fiscal year were based on $62 a barrel.
The current price of a barrel is around $40.
The rule of thumb in Louisiana is that for every dollar drop in the price a barrel of oil below the estimate, the state loses $12 million annually in revenues.At the current oil price, the revenue shortfall will be roughly $264 million.
Because of the way legislators structured the budget (not because of the constitution) that means significant mid-year cuts to higher education and healthcare.
Every cut to healthcare services will be exacerbated by additional cuts in federal matching funds.
The $12 million figure assumes production remains the same. In other words, the state will tax the same amount of oil, but merely at a percentage of a lower base.
The Baton Rouge Business Report’s Daily Report also revealed the volume of oil produced in Louisiana is dropping significantly.
Since 2011, the average daily production through the first half of 2015 dropped by over 40 percent. This means, not only has the base price oil on which taxes are collected lower, but the volume of oil to be taxed has significantly declined.
How much more in mid-year cuts to higher ed and healthcare is anyone’s guess because our state officials have chosen to ignore the issue.
The Lake Charles American Press editorial sounded a wake-up call, which so far has been met with resounding silence by our elected officials.
Delaying a reduction in revenue estimates will result in dramatically larger cuts to services and higher taxes later in the fiscal year.
Other than a promise of a special session next year, the state’s fiscal crisis is not even on this fall’s election radar.
If legislators and gubernatorial candidates won’t even address the issue it is safe to assume that none have a plan to fix the budgetary problems even short term much less long term.
I’ve found no evidence politicians, after they’re elected, are any smarter than before they’re elected.
It’s time for us voters and the media to insist candidates for both the Legislature and governor discuss publicly real solutions to real fiscal problems.
If legislators didn’t have time to fix the budget problems during the 2015 regular session, it is hardly likely they can fix an even worse problem in a 30-day special session prior to the 2016 regular session.