DALLAS - Louisiana Gov. Bobby Jindal has proposed mid-year fiscal 2009 budget cuts totaling $341 million as state revenues continue to fall due to a drop in energy prices.
Jindal issued an executive order on Tuesday that put into place $162.5 million in cuts. That is the maximum provided for under the state constitution, which allows the governor to trim general fund spending by 3%. The general fund budget for fiscal 2009 is $9.4 billion.
The Joint Legislative Committee on the Budget will meet Jan. 9 to consider the remaining $178.4 million in cuts proposed by Jindal.
The governor's proposals include $40.5 million in debt service savings realized by delaying three planned bond issues.
The state decided in late October to postpone a sale of $500 million of general obligation bonds until at least spring 2009 due to unfavorable market conditions. Jindal said the delay would save $20 million in debt service.
The sale of $200 million of lease revenue bonds by the Louisiana Local Government Environmental Facilities and Community Development Authority will be delayed until August. Bond proceeds will finance construction projects at the state's community college and technical school system.
Delaying the bond sale saves $12.6 million in debt service payments, Jindal said, which will eliminate the need to cut the system's general fund appropriations.
The state will also hold off on issuing the remaining $65 million of bonds for the Federal City Project in New Orleans. The first $25 million of a planned $90 million offering was sold in September.
Jindal said the bond proceeds would be sufficient to get work under way on the project, which satisfies the U.S. Navy's requirements. The project will convert an old naval base into a high-tech office complex for federal, state, and local government agencies in the Algiers section of New Orleans.
Delaying the Federal City bond sale will save the state $7.9 million in debt service, the governor said. The 2008 Legislature appropriated $8.3 million for the first year of debt service from up to $150 million of bonds for the effort.
The state Revenue Estimating Conference warned in mid-December that Louisiana had to cut its fiscal 2009 general fund budget by $341 million, while anticipating a $2 billion shortfall in fiscal 2010, due to declining revenues from state's severance tax on oil and natural gas.
The Legislative Fiscal Office used an oil price of $84.23 per barrel in estimating revenues for fiscal 2009, but the latest spot market price is below $40 per barrel.
Other cuts include $118 million from the Department of Health and Hospitals, $55.2 million from higher education, $11 million from the Department of Education, and $11 million from the Department of Corrections,
Jindal said the proposed cuts are "a first step in an effort to right-size state government, to maximize efficiencies, to eliminate non-essential expenditures, and to begin identifying savings" for a projected $1.26 billion revenue shortfall in fiscal 2010.
"When governments face economic shortfalls, there are only three possible solutions: go into debt, raise taxes, or tighten our belt and cut spending," Jindal said. "When Washington faces this problem, they usually make the wrong choice, preferring to first incur mountains of debt, then to raise taxes, and rarely do they ever cut spending in any meaningful way."
"On my watch in Louisiana, we will do it in just the opposite manner," he said.
House Speaker Jim Tucker called Jindal's cost-cutting plan "a solid approach to tackling non-essential spending and increasing government efficiency, and it should provide a strong foundation for the deeper reductions we will need to make next year."
Louisiana's GOs are rated A1 by Moody's Investors Service, and A-plus by Standard & Poor's and Fitch Ratings.