Governor Edwards opens special session to address state budget
BATON ROUGE - Governor John Bel Edwards opened a special session to address Louisiana's $304 million budget deficit Monday night.
In his opening address, he pleaded for Republicans and Democrats to compromise in order to solve the state's budget crisis.
The governor's plan, if approved, would use $119.6 million from the state's "rainy day fund" and call for $60 million in budget cuts to government agencies. The governor has specified that he aims to avoid cuts to higher education, K-12 education, waivers, public safety, law enforcement, child abuse prevention, foster care and minimize the blow to the state's partner hospitals.
The Governor's remarks can be read below in their entirety:
Thank you all for giving me the opportunity to be with you this evening, and I will start by offering my apologies.
To your spouses and significant others who will spend yet another Valentine’s Day without you, I am sorry.
I would also like to take a moment of personal privilege and ask you to join me in congratulating my Chief of Staff, Ben Nevers. As might have heard, after more than 30 years of service to the people of Louisiana, including 16 years in the legislature, Ben is set to retire at the end of this month. I, like many of you, have relied on Ben’s support in my time in the Capitol, so Ben, thank you for all that you have done for the people of Louisiana, and we wish you and Ann a peaceful retirement.
Today, we are gathered here with a critical mission and a common purpose – to stabilize the state budget in a responsible way while still adequately funding the programs and services the people of Louisiana consider to be priorities.
As you all know, we are facing a $304 million budget shortfall for the current fiscal year that ends on June 30th, just four months after the conclusion of this special session. I have brought you all here because your input is necessary and to open up the entire budget to make the kind of budget adjustments we need, including areas of the budget that are off limits without a special session – such as the legislature and the judiciary. Without you here, the cuts would be concentrated on a narrower spectrum of the budget and would be deeper and more painful than is necessary to close the gap.
First, I would like to talk a little bit about the Fiscal Year 17 budget and what it looks like before outlining what I believe is the best approach for solving this mid-year deficit.
We are operating under a budget that started the fiscal year $326 million short of the funding needed to provide the same level of service to the people of Louisiana this year as we did last fiscal year. That is why the TOPS program was, unfortunately, cut by $90 million, despite my plan to fully fund it, in addition to cuts to higher education, corrections and a host of other agencies and departments, including the executive department, the judiciary and the legislature. It is an honest budget that was crafted without the use of one-time money and contains no fund sweeps. There were no contingent appropriations (because of my veto) or other gimmicks. No increases for inflation or merit pay raises were built into the budget, either. Unfortunately, revenue has lagged the forecast upon which the budget was based.
Our mission over the course of this special session is to minimize the burden we place on Louisiana’s families, while funding the priorities you all outlined in the budget you passed last year, and that I signed into law.
There are no easy options, which is why Commissioner Jay Dardenne and I have spent hours upon hours combing through every line of the state budget.
We have purposefully taken a deliberative and balanced approach to eliminate this shortfall, recognizing several factors.
First, two months ago, in December we made $313 million in budget adjustments and cuts to close the state general fund shortfall for the fiscal year that ended last June.
Second, and this is critically important, the historic August floods across South Louisiana have left the state with more than $246 million in unbudgeted, unexpected and unreimbursed expenses for this fiscal year, worsening a cash flow problem that already hampered many state agencies. These challenges, combined with the recent tornadoes, have made our work much more difficult. Please note: in the last 12 months, 57 of our 64 parishes, representing 85 percent of the population, have received a federal disaster declaration. While there is a shortage of money; there is no shortage of challenges.
After years of budget challenges, there simply are no easy options. I’ve said this on numerous occasions – every cut and every budget adjustment we make will have a direct impact on someone in this state and we must be mindful of that.
And while I wish we were on a more solid fiscal foundation, until we make the structural budget and tax reforms we all agree we need, our options are limited and our problems exacerbated by the fact that there are only four months left in the next fiscal year after this special session adjourns.
As you know, to solve this shortfall, I am not proposing to raise any taxes or any fees. I am proposing the use of one-third of the state’s Budget Stabilization Fund, also known as the Rainy Day Fund, cuts of more than $60 million that must be absorbed in just four months, and budget adjustments that use available state funds to replace state general fund.
Now, I am aware of the criticisms of using this approach, however, we should be mindful that, the Budget Stabilization Fund was created for this very purpose. In fact, before I took office, the state tapped this fund four times during the last administration when our budget challenges were much less severe, and this $120 million accounts for less than 40 percent of the overall shortfall.
You should all know that the Budget Stabilization Fund was created in 1990 so that we would have a savings account to stabilize our budget against precipitous revenue declines, especially when they occur mid-year, and it was specifically designed to fund critical priorities when mineral-related revenue declines, as it most surely has – just $26 per barrel at this time last year compared to $110 barrel in August of 2013 and $53 today.
This is also why it is funded, in large part, by excess mineral revenue realized in good years. Additionally, you should know that $25 million will be deposited into the Budget Stabilization Fund later this fiscal year. Additionally, the state will begin to receive funds from the BP Settlement stream, related to reimbursement of 45 percent of state expenses. This will happen for 15 years, beginning in 2019, for a total of about $360 million. This is in addition to any excess mineral revenue or other contributions.
Simply put, not using the Budget Stabilization Fund, in my view, would be a mistake. Not using the Budget Stabilization Fund would inflict more pain upon Louisianans than is necessary or advisable.
Under my plan, we are able to avoid cuts to higher education, K-12 education, waivers, public safety, law enforcement, child abuse prevention, foster care and, very importantly, minimize the blow to our partner hospitals with whom we just finished renegotiating every single partnership agreement at considerable state general fund savings to the state. However, that will not be the case if we do not make full use of the Budget Stabilization Fund. That’s not fear-mongering, a scare tactic, or an exaggeration. It is reality.
You only have to consider the “demonstration” previously advanced to get a glimpse of the cuts to our most critical priorities, including health care and education, to know the reality of the situation should you opt not to use the Budget Stabilization Fund.
I know the task is not easy and that my plan is not pleasant. At this point, we are choosing the best of bad options. But, that does not absolve us of our responsibility to proceed wisely.
When we meet here in April, I will again propose a transparent, honest and responsible budget for the next fiscal year. We will have the opportunity to enact bold, long-term budget reforms that will lessen the frequency and severity of mid-year deficits that too often have produced destabilizing cuts to critical services and will prevent us from needing to use the Budget Stabilization Fund too frequently.
We will also have the opportunity to close the structural budget deficit for good, stabilize our state, and tackle long-term, comprehensive tax reform – focusing on both revenue and on tax expenditures that are too costly and produce too little in return. This will give us the ability to invest in our children’s futures over time as we are able to do so.
What I’ve seen over the course of these budget negotiations is a strong desire from you all to make those reforms. I could not agree with you more, and I pledge to continue to be a partner with you, working in good faith, in that critically important effort.
Unfortunately, the sun isn’t shining yet. And first, we’ve got to take care of the problem before us in a balanced and responsible way.
So, if there is another option out there, let’s discuss it. Compromise isn’t a bad thing, but it is counterproductive to our mission to constantly criticize and oppose without offering a viable alternative. If collectively, you prefer more mid-year cuts than I have proposed, then propose those specific cuts and vote for them.
But, don’t resort to budget gimmicks; propose your cuts honestly and transparently. And let’s debate it. Let’s hear from our constituents and stakeholders. That’s why we are here.
Before I go, let me remind you about how far we’ve come since last year. When I stood here at the start of our first special session in 2016, we were talking about a $3 billion shortfall for the previous and current fiscal years. Thanks to the hard work of many of you in this room, we avoided catastrophe. We were bold. We were courageous, and we, to a large degree, stabilized our state with a balanced mixture of revenue, cuts and savings. That, too, wasn’t easy, but it was necessary.
Have no doubt – we are creating a stronger Louisiana. And while there’s still more work to be done, we can look back on the last year with the satisfaction of knowing that we’ve begun the process of rebuilding Louisiana.
Let’s not take a step backwards.
Instead, let us continue that work in this special session. I pledge to be a partner with all of you and begin this special session with an open mind. We have 10 days.
So again I say to you, let us be Louisianans first – not Democrats or Republicans.
Let us put Louisiana first – not rigid partisanship or political self-interest. If there is one thing I hope you’ve learned from me over this last year, it’s that my door is always open. I am accessible and I will engage with you. I remain bullish on our future and my optimism in Louisiana has never been greater.
Let’s get to work.
God bless you all and God bless the great state of Louisiana