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Cuts coming to close Louisiana's $129M deficit

Melinda Deslatte, Associated Press

BATON ROUGE, La. (AP) -- Louisiana's budget picture grew bleaker Thursday, when the state's revenue-forecasting panel dropped income estimates by $129 million, creating a midyear deficit that leaves colleges and health services vulnerable to new rounds of cuts.

Gov. Bobby Jindal's chief budget adviser, Commissioner of Administration Kristy Nichols, said she will announce the cuts to lawmakers Friday, to rebalance the $25 billion budget for the fiscal year that ends June 30.

"The projections today were not unexpected to us. We're prepared to present a plan," Nichols said after agreeing to the latest income revisions, as a member of the Revenue Estimating Conference.

Most at risk of hitting the chopping block are higher education and health care, the two largest areas of unprotected, general fund spending. Jindal can make cuts of up to 3 percent to the state general fund spending planned for each agency without legislative approval, Nichols said.

Midyear budget gaps have become an annual scourge for the poverty-ridden state, with cuts required in the middle of the fiscal year for five years in a row, sometimes with more than one gap appearing in a year.

"Things don't look very rosy," said Senate President John Alario, R-Westwego, one of the members of the income forecasting panel.

With the latest revisions, Louisiana's general fund revenue is projected to drop by more than 1 percent this year compared to last year, to less than $8 billion, as the state continues to grapple with the lagging economy and financial uncertainty.

Unemployment remains below the national average, but personal income is expected to grow only modestly, and spending as reflected in sales taxes is expected to be nearly flat, according to the projections offered Thursday by the economists that advise the income forecasting panel.

The four-member Revenue Estimating Conference made sizable cuts in forecasts for individual income and sales taxes and for revenue from oil and gas. Improved expectations for corporate income tax collections helped lessen the blow, but the news was nearly all grim.

"This situation is obviously not pretty," Manfred Dix, the chief economist for the governor's Office of Planning and Budget, warned before he began his presentation.

House Speaker Chuck Kleckley, R-Lake Charles, said he hears encouraging news about the economy and income growth when talking to people around the state.

"Then, we come here and see this. It's just discouraging," he said.

Next year's budget forecast also worsened, with the forecasting panel dropping income estimates $207 million, leaving lawmakers with a nearly $1.2 billion budget gap to close in the fiscal year that begins July 1. The Jindal administration and lawmakers will deal with that forecast in the next regular legislative session when they craft new spending plans.

In office when the budget deficits began, Jindal has steadfastly refused any tax increases to fill gaps, and he's continued to support new tax breaks despite the budget woes, saying the state must cut costs and live within its means.

Economists advising the Revenue Estimating Conference stressed that if the White House and Congress don't reach a deal on the federal "fiscal cliff," Louisiana's revenue drops could worsen because several parts of the state tax code are tied to federal tax rates.

The forecasting panel has four members: Nichols, Alario, Kleckley and an independent LSU economist, Jim Richardson. All members must agree to income estimates before they can be revised.