DALLAS — Louisiana Gov. Bobby Jindal plans to close a $366 million budget gap over the next 10 weeks with funds earmarked for resolving a dispute with the federal government and money from a settlement with a pharmaceutical company.

The state must close the fiscal 2010 shortfall created by a $319 million drop in expected revenue, and $48 million of higher-than-expected expenses. The hole in the $29 billion budget must be filled before the current fiscal year ends June 30.

Jindal said at a news conference on Friday that he would close some of the gap with $195.3 million set aside by the Department of Health and Hospitals that may be needed in fiscal 2011 to repay the federal government if the state loses a disagreement over Medicaid funds.

The total includes $154.5 million of disputed overpayments to the state charity hospital system that cares for uninsured patients.

The gap-closing plan also includes using $106.6 million the state received from Eli Lilly & Co. in a settlement, and $65 million saved through spending and hiring freezes that went into effect in January.

Jindal said he would replace the money taken from the funds set aside to resolve the Medicaid dispute from $321.4 million of additional Medicaid funds the state would receive in fiscal 2011 from a proposed extension of stimulus legislation currently before Congress.

The Republican governor has opposed the stimulus program, but said he expects the extension will be approved. If it is not, he said, alternatives would be explored.

The U.S. House and Senate have approved separate versions of the legislation that would extend the stimulus program, which is to expire at the end of 2010, for another six months.

Jindal’s plan does not include use of the $172 million that could be allocated from the budget stabilization fund in fiscal 2010 due to the revenue shortfall.

Jindal said he wanted to reserve that fund to make up for the cutoff of federal stimulus funds in fiscal 2011. He supports legislation that would allow the rainy-day fund to be tapped next year, which is currently not allowed.

Unlike the $245 million in spending cuts Jindal ordered in January, the new gap-closing plan must be approved by Legislature, which is in session.

House Speaker Jim Tucker, R-Algiers, said some lawmakers do not want to wait until next year take money from the rainy-day fund.

He said the state should be careful about spending the money now allocated for resolving the Medicaid dispute without assurances that the stimulus extension will be approved.

“I think the greatest problem that I have with the plan right now is we don’t know if the federal government is going to give us that money or not,” Tucker told reporters on Friday, adding that he hopes the budget can be balanced quickly.

“Our analysts are looking at every single department and trying to make good, solid decisions about what we can do to fill this hole,” he said. “They are moving as quickly and as judiciously as possible to try to mitigate cuts, particularly in higher education.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.