Gov. John Bel Edwards’ executive budget should not be taken literally. Almost no one, including the governor himself, expects the drastic cuts proposed on Jan. 22 to be enacted when the state’s 2018-19 fiscal year starts on July 1. Instead, the budget plan should be taken as a very serious warning of what can happen to vital state investments in health care, education and social services if the political deadlock in Baton Rouge is not broken.

The “doomsday” budget should come as no surprise to the Legislature, as it has been more than two years in the making. With the state facing massive budget shortfalls in 2015 and 2016, the Legislature agreed to raise much-needed revenues. But some of the big-ticket items, including a 1 percentage point increases in the sales tax (the “clean penny”) were set to expire on July 1. The idea behind making the taxes temporary was to give the Legislature time to craft a more permanent, workable tax structure. But so far that hasn’t happened.

The expiring taxes total almost $1.4 billion, and are the main reason the State General Fund is decreasing by almost $1 billion next year. Now the day of reckoning is at hand, and policymakers have a simple choice: Either renew the expiring taxes, replace the expiring taxes with different revenue sources, or make severe cuts to health care, higher education and other services.  

On the surface, cutting $1 billion from a total budget of more than $27 billion may seem tenable. But that’s far from the whole story. Only 29 percent of the budget is made up of State General fund dollars – the rest is federal money, fees and “self-generated” money (such as tuition) and money dedicated to specific purposes. And nearly two-thirds of the State General Fund is off-limits to cuts (“non-discretionary”) because the state has no choice in whether to spend certain dollars. Examples include debt payments,  pension obligations and the Minimum Foundation Program (state payments to public schools).

That means the $1 billion must be cut from $3.4 billion in “discretionary” State General Fund. That’s a cut of almost 30 percent, and explains why health care and education programs are so severely targeted. It’s the only place to cut.  

The executive budget is a constitutional requirement. It’s a starting point for negotiations on spending and revenues that must be finished by June 30. Here are the highlights (or lowlights) of the Governor’s FY 2019 executive budget:

  • The expiration of temporary taxes drops the State General Fund from $9.6 billion to $8.6 billion.
  • The $994 million reduction in State General Funds would trigger the loss of $1.6 billion in federal funds and $340 million in fees and statutory dedications, bring the total state budget reduction to $2.8 billion.
  • The executive budget includes $261 million in new spending on required information technology updates, debt service and public school funding to account for increased enrollment, which required additional cuts to be made in other areas.
  • Cuts to health services:
    • Near elimination of behavioral health services including substance abuse treatment and mental health services for the traditional Medicaid population ($43.7 million)
    • Reduction in supplemental payments to “public-private partnership” hospitals providing care to a disproportionate number of uninsured patients ($189.5 million)
    • Elimination of pediatric day health services and Children’s Choice waiver ($15.6 million)
    • Elimination of long term care for disabled or elderly persons who earn just above the Medicaid eligibility limit ($231.1 million)
    • Elimination of personal care services program that assists elderly or disabled persons with activities of daily living, such as bathing, grooming, and mobility ($56 million) and keep them from more expensive nursing home care.
  • Cuts to higher education
    • Reduction in funding for colleges and universities ($25.7 million)
    • Elimination of all state general funds for TOPS ($233.3 million)
    • Decrease funding for needs-based Go Grants by 50% ($13 million)
  • Cuts to public safety and corrections
    • Elimination of funding for major repairs and replacement vehicles ($21.7 million)
    • Closure of five regional offices providing community-based supervision services for former juvenile offenders
    • Reduction of $5 to the per diem rate paid to sheriffs and transitional work program operators ($34.1 million)
    • Elimination of funding to district attorneys and assistant district attorneys ($25.8 million)

The ripple effects of the cuts would far reaching. Taking nearly $3 billion out of the state economy would reduce our gross domestic product, and jobs would be lost in both the public and private sectors. More Louisianans would choose to move to another state.

The Legislature has had several opportunities to fix the state’s budget shortfalls in special and regular legislative sessions, but instead has allowed the state’s fiscal situation get to this tenuous point. But time has run out and it’s time to fix these problems now.

Learn more at www.investlouisiana.org.