BRADENTON, Fla. – With little time left in a special session dealing with Louisiana's historic budget crisis, Gov. John Bel Edwards commended the Senate for passing a tax increase to help close the state's large budget gap.
At the same time Edwards, a Democrat, admonished a lawmaker's suggestion that they may not be able to cure the current $940 million deficit before the fiscal year ends June 30.
The Senate Tuesday voted for a five-year, one-cent sales tax increase that would be combined with the $160 million in spending cuts and other revenue-raising measures to address the current shortfall.
Both houses are controlled by Republicans.
The House has voted on some bills, including an increase in the sales tax for 18 months, but other steps have fallen short of plugging the gap. The House has also delayed action on some bills that it must consider before the legislation can proceed to the Senate.
The Legislature is slated to conclude its three-week special session March 9.
Earlier this week, concern over the budget impasse heightened when House Appropriations Chairman Cameron Henry, R-Metairie, suggested that lawmakers might be required to deal with some of the deficit in the 2017 budget absent agreement on certain bills.
The state already faces an estimated $2 billion shortfall for the year starting July 1.
"The suggestion that we should sit back and let this problem continue into the next year is reckless and jeopardizes Louisiana's already weakened credit rating," Edwards said in a statement Tuesday night. "We have eight days to agree on the solutions to solve this crisis."
On Feb. 26, Moody's Investors Service cut the state's general obligation bond rating to Aa3 from Aa2 because of deteriorating revenue collections and the impact years of structural imbalance have placed on the state's reserves and liquidity.
Moody's lowered all other state ratings by one notch, and said the outlook is negative. It also placed eight Louisiana public universities on review for possible downgrade amid the current budget crisis.
Fitch Ratings and Standard & Poor's both assign AA ratings to Louisiana's GOs. S&P has a negative outlook, while Fitch has a stable outlook. Both have warned the state about its precarious finances.
Edwards vowed to work with both parties to stabilize the state budget this year and going forward.
The current-year shortfall includes a $117 million general fund operating deficit from fiscal 2015. The state has also seen declining revenues partly because of plummeting oil prices.
Along with increasing the sales tax to deal with some of the shortfall, lawmakers are also considering an increase in cigarette, beer, wine, and liquor taxes but have encountered disagreement over some of them.
In the regular session March 14 through June 6, legislators likely will consider bolstering state revenue collections further by removing some exemptions, including exclusions, deductions, credits, rebates, incentives, deferrals, and sales tax exemptions.
In 2015, the state had 464 exemptions totaling about $7.9 billion, compared to the $7.5 billion received from tax collections, according to a Feb. 19 report by state auditor Daryl Purpera.
