Closures and layoffs during the ongoing coronavirus dealt Louisiana an economic tumble it has not seen since Hurricane Katrina, according to the financial forecasts state economists released Monday.
Louisiana lost nearly $1 billion from the coffers thanks to the pandemic, along with the freefall in oil prices, according to the forecast the Revenue Estimating Conference issued Monday.
The REC’s projections dictate how much the state can budget for healthcare, K-12 education, colleges and a litany of state programs.
The plunge in revenue will affect the state as lawmakers try to hammer out a budget for the 2021 fiscal year, which begins July. 1. Legislators have until June 1, which leaves them less than three weeks to agree on a spending plan.
REC projections include a $316 million drop in sales tax revenue, along with a $351 million hit on severance taxes and $172 million less from casino and riverboat gambling.
The downfall leaves the state with $11.5 billion, a tumble from the $12.6 billion figure the REC agreed upon in April 2019.
The $867 million loss deals the state an unexpected blow during a year when lawmakers had hopes that the $500 million surplus last year would allow more flexibility for spending in healthcare, K-12 education, early childhood education and college funding
“The $867 million is a very challenging number,” Gov. John Bel Edwards said during his press briefing Monday at the State Capitol. “But there’s no reason to say we will know more in June than we know now, so I think it would be a pretty good bet that we will be coming back in October to make adjustments to the budget for the remainder of the fiscal year.”
The Rainy Day Fund, CARES Act money and other additional money does not make it much easier.
“Even with those things, it has become a very challenging budget,” Edwards said.
A plunge in oil prices during the first quarter of 2020 also contributed to the fiscal crater lawmakers face in the session.
Prices tanked below $20 per barrel – and down to zero briefly last month. Economists have set new per-barrel estimates between $28 and $30, which represents a sharp decline from the $60 per barrel price in the last forecast.
Edwards hopes to see some relief through the $1.8 billion in revenue from Congress, along with additional money Sen. Bill Cassidy proposed in the Cassidy-Mendendez Bill.
The prices began to tumble around the time lawmakers went into session March 9, but numbers have since dropped to levels not seen since the 1980s.
A drilling war between Saudi Arabia created a huge oil glut that led to the freefall, Meanwhile, a reduction of 10 million barrels per day by the Saudis hardly put a dent on the oil supply.