Louisiana’s budget problem could be worse than expected
Julia O’Donoghue of The Times-Picayune reports that an economist who works on revenue projections for the state believes Louisiana could end the budget cycle June 30 with as much as a $200 million deficit in part because of low corporate tax collections. A shortfall in the current budget would make Louisiana’s budget problems in the next fiscal cycle worse. Louisiana already faces a $600 million gap for the budget year that begins July 1. Any additional shortfall would widen that gap.
LSU economist Jim Richardson, who has worked for decades on revenue issues for the state, met with Gov. John Bel Edwards, Senate President John Alario, House Speaker Taylor Barras and Edwards budget chief Jay Dardenne late on Thursday (June 16) to talk about the potential deficit, according to the governor’s office (NOLA.com).
Edwards and Senate leadership are likely to use this news to put pressure on the House to approve more tax increases or tax credit rollbacks. The governor and Senate leaders believe they need to generate far more money to stabilize the state’s finances than the House does. The two groups have less than a week left to resolve their differences (NOLA.com).
The state was expecting corporate tax collections to be $359 million for the budget cycle that ends June 30. Through May, Louisiana had collected only $50 million, leaving more than $300 million to collect mostly in June and possibly July (NOLA.com).
Corporate tax collections are unpredictable, and the vast majority of the money tends to come in at the end of the budget cycle — in May, June, and late collections in July (NOLA.com).
“Unless it’s a real miracle, I don’t think we’re going to make it,” Richardson told The Associated Press (NOLA.com).
State economist Greg Albrecht also said it’s going to be tough for corporate tax collections to reach the target. Albrecht should know since he came up with the $359 million projection for the state in the first place. He also attended the meeting with the governor, legislative leaders and Richardson on Thursday night (NOLA.com).
It’s possible the state could make up for any deficit in corporate tax collections elsewhere, such as with sales or gas taxes. But Richardson saw no reason to believe that will happen (NOLA.com).
“There was no sign that they were going to make up that difference or allow us to offset in some other way,” he told The Associated Press (NOLA.com).
Albrecht said he wasn’t sure why corporate tax collections are down, but the state’s tax amnesty program is still having a negative impact. About $57 million in corporate taxes ended up going through the amnesty program instead of through the state’s traditional tax collection process this year (NOLA.com).
That depresses the overall corporate collections, he said. Under the amnesty program, the state receives fewer tax dollars from corporations that it might be owed and have collected otherwise (NOLA.com).
Businesses in certain parts of the state affected by flooding may also be late paying their taxes, which could account for why they are so low. Thirty-six parishes were given extensions for filing taxes because of flooding earlier this year, Louisiana Revenue Secretary Kimberly Robinson said in an interview Thursday night (NOLA.com).
Others are blaming Louisiana’s low corporate tax collections on breaks given to the business community. For several months this year, Louisiana was giving more money away to corporations than it was collecting because of tax credits, refunds, and exemptions (NOLA.com).
In March and April, corporate tax collections had taken a positive turn, with Louisiana collecting more money from corporate taxes than it was giving out. But in May — traditionally a big month for corporate tax collections — the state sent corporations $23 million more than it got back (NOLA.com).
The news of low corporate tax collections comes at a time when lawmakers are already considering rolling back business tax benefits to help stabilize the state’s finances (NOLA.com).
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