While oil prices, and predictions about where they’re going, don’t paint a pretty picture for the state of Louisiana, we’re unlikely to see a true and complete portrait of their effect on the current fiscal year budget until the next governor is sworn in.
Despite assessments from economists that the budgeted forecast for oil prices will not be met, and that other areas of the economy may not pick up the slack, Gov. Bobby Jindal’s administration insists no changes should be expected this calendar year — changes, of course, that would mean less money for an already-ailing budget.
The difference of opinion comes at a time when Jindal is seeking to energize his presidential campaign in early caucus states.
State lawmakers are also facing re-election on the fall ballot following a tumultuous session that is prompting opponents to throw mud their way in the form of votes they took on taxes and the budget.
No one from the Capitol class could possibly benefit from mid-year budget cuts or even a forecast alteration. That creates a scenario where the next governor could be saddled with another financial dilemma, which could include not only a needed change in the forecasted price of oil for the current budget year but also immediate spending reductions.
All of the gubernatorial candidates have promised a special session after taking office to improve the tax code and overall budget situation. But Lt. Gov. Jay Dardenne is among the first to say he’ll need a quick special session right off the bat specifically for the 2015-16 budget.
Greg Albrecht, the state’s chief economist, said the 2015-16 budget forecast for oil being at roughly $62 a barrel and the actual price currently hovering around $40 doesn’t make for a great combination.
While the $62 figure refers only to the annual average price, the slide has been so consistent that it’s becoming difficult to imagine how the average is reached without a major rally.
“That forecast is unlikely to be made this year. No doubt…” Albrecht said. “What we need to know now is whether there are any offsets that will make up the difference, and we’re still trying to close the books right now on FY15.”
Louisiana loses $12 million for every $1 decrease in the annual average price of a barrel of oil.
The Revenue Estimating Conference, which determines how much money the state has to spend, meets in September and some members want the issue on the agenda. LSU’s Professor Jim Richardson, who sits on the REC, isn’t optimistic.
“Today I do not think there are enough offsets to make up the losses in oil prices,” he said. “No one expects it to bounce back. But again, we can always be surprised if offsets are found.”
Jonathan Walker, director of policy and communications for the Division of Administration, said there will indeed be offsets to make up for the sliding price of oil, starting with more taxes paid by businesses and others in relation to the bills passed by lawmakers this session.
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