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|Solons prep for budget deficit|
A $1.3-billion budget deficit may be looming on Louisiana's horizon for the next fiscal year thanks in part to plummeting oil prices and soft sales tax revenues.
State Rep. Frank Hoffmann said lawmakers have discussed the possibility of holding a special session to deal with a projected $1-billion surplus in the 2008 fiscal year. That could be where the solution lies.
"There is talk of having a special session after January to look at that surplus," said Hoffmann, R-West Monroe. "I think we have to look at a rainy day situation because we're headed for it."
"Everyone is," he said.
Hoffmann said the downturn in oil prices has him somewhat concerned about state finances in the current fiscal year as well. That's the case because the 2008 fiscal year budget was based on a crude oil price of $84 a barrel. The price of oil has remained below that mark for several weeks.
That means the state will collect less severance taxes than lawmakers anticipated when they adopted the state's spending plan for the 2008 fiscal year. Since a significant portion of state revenues are derived from taxes on oil production, a decline in crude prices affects state revenues.
So far, officials are not projecting a budget deficit in the current fiscal year because the $84 per barrel price is an average yearly figure, according to State Sen. Neil Riser.
"I want to see the year-end numbers," said Riser, R-Columbia. "These oil numbers are based on the yearly average and not the day-to-day price."
In the current fiscal year, oil has traded as high as $140 a barrel. That gave the state's average a bit of padding and should more than make up for the period of time oil has been below the $84 a barrel mark, Riser said.
Also, current revenue estimates for the coming fiscal year have oil estimated at $74 a barrel.
State Rep. Jim Fannin said the biggest contributor to the $1.3-billion projected deficit is not from oil prices but from a softening sales tax base.
"We've had three or four years of high sales taxes because of Katrina and Rita," said Fannin, R-Jonesboro. "Now we have kind of a double-whammy because the economy is weakening and the sales taxes are leveling off."
Fannin, who chairs the House Appropriations Committee, noted current revenue estimates are based on $74 a barrel for the upcoming fiscal year. So Fannin believes the state's finances are secure but $1.3 billion less will mean cuts.
State Sen. Mike Walsworth said the idea of cutting state spending may not sit well with some of his colleagues in the Legislature.
"No one looks forward to cutting, but that's what we're facing," said Walsworth, R-West Monroe.
Meanwhile, both Walsworth and Hoffmann noted the current fiscal year seems to be headed toward a surplus.
For Hoffmann, the potential shortfalls highlight the positive progress the state has made in fiscal responsibility. For Walsworth, the deficit is as much an opportunity as it is a dilemma.
"I've always said our best budgets are those in which the Legislature has to say what its priority is with the governor and then funds those priorities," said Walsworth. "We don't know what our economic situation is going to be over the next 10 months."
"There is a difference between cutting the budget beforehand and being forced to make cuts after the fact," Hoffmann said.