BRADENTON, Fla. – Louisiana Gov. John Bel Edwards set a deadline of Jan. 19 for state lawmakers to figure out how to replace $1 billion in revenues supporting the state general fund that expire at the end of this fiscal year.

If legislative leaders reach an agreement with Edwards before that, he will call a special session in February to approve bills designed to avoid the so-called “fiscal cliff” when revenue-raising measures such as a 1 percent sales tax increase terminate.

If House and Senate leaders don’t agree on a plan in advance to address the shortfall, Edwards said he will not call a special session.

Louisiana Gov. John Bel Edwards
Louisiana Gov. John Bel Edwards said lawmakers must agree to replace $1 billion in expiring revenues by Jan. 19 or he will cut the budget. Southwest Louisiana Economic Development Alliance

“I’m going to release my executive budget proposal for the next fiscal year on Jan. 19 and that is the plan if we don’t fix the cliff because we are constitutionally obligated to deliver a balanced budget proposal and that proposal will be premised on a loss of revenue by $1 billion dollars,” he said.

The budget cuts, he said, can only come from a discretionary portion of the general revenue fund that is only $3.5 billion. Of that, the “only two sizable pots” of funding are for higher education and health care, two areas where he said people across the state have told him they don’t want cut.

Because of dwindling state revenues, a slow economy and low oil prices, lawmakers instituted temporary revenue measures two years ago to work on tax reform and address Louisiana’s budget imbalance.

House Republicans have rejected suggestions made by Edwards, and have not passed any of their own.

Edwards has said he does not support extending the 1% sales tax that raises about $900 million, and recently proposed a series of revenue measures based partly on recommendations of a task force appointed by the Legislature to study tax reform. To date, there have been no agreements with lawmakers.

“I don’t know how to be more fair than to give the Legislature its own plan,” he said, referring to his latest proposals. “We are not asking for new revenue. We want a revenue-neutral solution.”

The inability of state officials to address the imbalance has led rating agencies to downgrade the state’s general obligation bond ratings by one notch.

S&P Global Ratings lowered the state's GOs to AA-minus from AA in March, and maintained a negative outlook.

Last year, Fitch Ratings downgraded the state to AA-minus from AA, and maintained a stable outlook, while Moody's Investors Service cut its GO ratings to Aa3 from Aa2, and assigned a negative outlook.

Louisiana’s fiscal struggles could be easing as the economy improves.

Despite beginning fiscal 2017 with a deficit that also required two mid-year budget cuts, the state ended the year with a surplus between $122 million and $129 million.

“More importantly, I suspect for most people, is in the current year we do not anticipate a mid-year deficit and that will be the first time in eight years,” Edwards said, calling it the benefit of stability.

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