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Story Archives: Fannin paints grim picture at Monroe chamber luncheon


Fannin paints grim picture at Monroe chamber luncheon
by Scott Rogers - posted Tuesday, February 3rd, 2009 @ 3:38 pmE-mail Story E-mail Story | Print Story Print Story 
Rep. Jim Fannin warned the projected $2-billion shortfall the state is facing in its 2009-10 fiscal year will not level out until government spends money within its means.

Fannin is chairman of the House Appropriations Committee, a legislative committee in the House of Representatives which oversees all state spending. He spoke Monday during an event sponsored by the Monroe Chamber of Commerce.

Fannin told local leaders that if they are not feeling the affects of the state's budget crisis now, they will soon.

Fannin also warned jobs will be affected as the state grapples with making cuts to balance the budget during the next Regular Session, which begins in March.

Gov. Bobby Jindal already has announced some $341 million in cuts to the state's 2009 fiscal year budget.

"We have to put ourselves in a position for government to function and provide services to people with less money," said Fannin, a Democrat from Jackson Parish.

Before hurricanes Katrina and Rita hit the Gulf Coast in 2005, state government worked with some $9.5 billion in state-generated revenue. The $9.5 billion figure did not include any appropriations Louisiana collected from the federal government. After the hurricanes, state revenue grew to $10 billion by the end of 2006, Fannin said.

During this time, construction was strong as people rebuilt homes and businesses. Sales tax also increased as people replaced items that were damaged by the storms.

By 2008, state revenues grew to about $12.6 billion, a figure that did not include monies the state collected from the federal government.

"We had a $3.5 billion increase in revenue all because of the storms and the issues the storms created," Fannin said. "We all had so many needs across this state, and the Legislature was guilty of putting in a lot of recurring dollars out of these one-time dollars. There were very few of us saying, 'This is not going to last. It can't continue at the rate it is.'"

"Certainly now, we see that it has not," Fannin added.

He said much of the money the Legislature appropriated over the past few years was used to fund highway projects and increase teacher salaries, adding the Legislature spent a majority of the money on issues or services the people wanted.

"But, in reality, we incurred a lot of growth in government because of that extra $3.5 billion (in state-generated revenue)," Fannin said. "Even though much of it was spent on one-time items, we did increase the recurring growth of this state."

He said most state leaders, prior to 2008, were aware that sales tax, personal income tax and corporate income taxes were all beginning to level off.

"The only piece of the pie that continued to increase was the mineral revenue with gasoline almost at $4 at the pumps," Fannin said. "That caused us to continue to have revenue. Now, every piece of the financial pie is down, but what's throwing us the huge curve is the mineral revenue. We are faced with a new economy today."

The Revenue Estimating Committee also has projected $1 billion less in revenue for the 2009-10 fiscal year.

"So how do we deal with a $2 billion shortfall, which includes less revenue and an increase in expenses that we have put in during prior years?" Fannin said. "I can assure you that jobs will be affected because we have no way to have a balanced budget with the revenue we have now."

Some 70 percent of the state budget is constitutionally mandated, leaving higher education and health care to bear the brunt of most mid-year budget cuts. Only if the REC declares that expenditures exceed revenues in the midst of a budget year can the governor call for budget cuts beyond higher education and health care. At that point, a governor can call for cuts in all areas of the state budget, but the cuts cannot exceed five percent.

The University of Louisiana-Monroe is facing cuts in state funding, ranging from $7.7 million to $14 million in the 2009-10 fiscal year. The proposed cut represents as much as 15 percent of ULM's $88 million budget.

According to Commissioner of Higher Education Sally Clausen, the total budget cuts for colleges and universities across the state will run as high as $212 million.

"We don't have a choice but to reduce those two areas (higher education and health care), so we have some tremendous challenges ahead," Fannin said.

People have asked Fannin if the proposed economic stimulus package, which could send up to $5 billion to Louisiana, can be used to bridge the gap in the state's budget.

He said that funding could be used to bridge the gap. However, he warned any money from the federal government always comes "with strings attached."

Meanwhile, the state has $775 million in its "Rainy Day" fund. That money could be used to help balance the budget, Fannin said. The "Rainy Day" fund was established by the Legislature years ago to aid the state in tough economic times.

"We could be using that as we move forward," Fannin said.

He said the state could take out one-third of the $775 million to help balance the budget. That would be roughly $258 million, he said.
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