Compared to many states, Louisiana is rolling in the dough at the moment. While uncommonly high oil and gas prices are swelling the coffers of the Bayou State, other states are up against the wall trying to balance their budgets.
As this column is being written, Governor Patterson is convening an emergency session of the New York State Legislature. The “emergency” is a projected $26 billion budget deficit over the next three years. In a less than robust response to the crisis, Governor Patterson is calling for $1 billion in cuts (from Medicaid and assistance to local governments)—not exactly a solution to the fiscal problems in the Empire State. While the governor’s proposal might be anemic considering the magnitude of crisis, it is stronger than that of legislative leaders who have identified only $200 million in cuts they will recommend to the Legislature while they figure out what taxes they will raise.
Then there is Florida. The Sunshine State has been hit hard by high energy costs and the collapse of the housing market. The consequences to the economy have been severe, and the state now leads the nation in the jobless rate. The Florida Legislature already had to restrain spending for the current budget and now is facing a $2 billion revenue shortfall.
Pressure is mounting on Governor Crist to call a special session to address the growing fiscal crisis. The governor was a big supporter of a ballot amendment that would have raised the state sales tax by $8 billion and offset property taxes with most—but not all—of it. That ballot proposal has now been deemed to be invalid, so it is back to the drawing board for the governor and the Legislature. If any significant hurricanes hit Florida, the current fiscal problems will be minor by comparison, since Crist and Company put the state treasury on the hook for much of the reinsurance that will have to pay off the losses.
But the biggest fiscal basket case of any state is (you guessed it!) California. The Golden State is anything but golden at the moment. The governor and Legislature continue to spar over how to close a $15 billion shortfall in the current budget. The governor wants a new one-cent sales tax that would not fully close the gap. The Democratic majority in the Legislature is proposing a $10 billion tax package (that would fall heavily on businesses), but they don’t have the two-thirds majority necessary to ram it through.
Interestingly, neither the governor nor the legislative majority is proposing any significant cuts to address the situation. The lack of serious budget cuts to close deficits is typical of the reaction in most states facing budget crises. Elected officials seem to be much more worried about cutting state spending than they are about raising the taxes on working folks.
Louisiana seems to be reverting back to its historical pattern of being on a trend opposite of where the rest of the nation is going economically. When other states are booming, more often than not Louisiana has struggled, and when the nation as a whole is on a fiscal slide, we are often on the upswing. The element that drives that trend is high energy prices.
For several years now, high oil and gas prices–along with post-Katrina recovery tax revenues– have poured hundreds of millions of extra revenues into our state treasury. Before we again think it will last forever, we would do well to remember how we spent past windfall revenues and what happened when that carriage turned back into a pumpkin.
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