Gov. Bobby Jindal has 30 days to come up with a list of $341 million in cuts to balance the state's budget, after lawmakers Friday accepted new, smaller state income projections.
The approval by the Legislature's joint budget committee was procedural, but it starts the clock ticking for Jindal to act to close the deficit in the fiscal year that ends June 30.
Jindal can cut a portion of the budget on his own, up to 3 percent of the state general fund for each "budget unit." But Ray Stockstill, director of budget policy and management in Jindal's financial office, said that only will close about $200 million of the gap.
For the rest of the cuts, Jindal will have to get the approval of the budget committee.
"There's nothing this committee can do independent of the administration?" asked Rep. Karen Carter Peterson, D-New Orleans, who was told the governor largely controls the process for closing a midyear deficit.
If the governor and the joint budget committee don't address the full gap within 30 days, Jindal must call a special session of the full Legislature to balance the budget. That isn't expected to be needed.
The governor hasn't said when he'll make the first cuts. He's already put in place a partial hiring freeze, hoping to save $25 million.
The heaviest cuts are expected to fall on health care and public colleges, the two largest areas of discretionary spending in Louisiana's nearly $30 billion budget.
The head of the state health department said he expects his agency to be slashed by $160 million, and higher education officials said they've been told to brace for $109 million in reductions. Some college leaders already have started laying off temporary staff, freezing travel, cutting overtime spending and enacting hiring freezes to cope with the expected cuts.
Lawmakers on Friday asked about areas they might target to address the financial problems.
Rep. Hunter Greene, R-Baton Rouge, asked for more details on the 2,700 vacant jobs in state government and suggested doing away with some of those positions.
Both Peterson and Sen. Ed Murray, D-New Orleans, asked about tapping a more than $400 million economic development fund designed to attract so-called "mega-projects" — big-ticket manufacturing facilities sought by the state.
Stockstill said using the dollars for anything other than economic development projects would require a change to the state law governing the fund.
Sen. John Alario, D-Westwego, said the mega-fund and other similar, untapped funds might be better used in the upcoming 2009-10 fiscal year, when the state is expected to have $1.2 billion less in state general fund cash to spend — and $2 billion less than what fiscal analysts said would be needed to continue all current state services and fund inflationary increases.
"Of that $2 billion, it's going to be really hard cuts that we have to look at," Stockstill said.
Louisiana State University released recommendations Friday for closing next year's budget gap, a proposal crafted by Bob Keaton, special assistant to LSU System President John Lombardi and a former longtime fiscal analyst for the state Senate.
Keaton said lawmakers could tap into one-third of the state's $782 million "rainy day" fund, and he said they could also use last year's $865 million surplus — built up when energy prices were high and before the national recession — to help close the gap.
State surplus dollars can only be used for one-time items like debt payments and construction projects, but Keaton said the surplus could be "applied creatively" to free up additional cash in next year's budget.
For example, Keaton said lawmakers could create an Economic Stabilization Fund in the treasury, put surplus dollars into that fund and transfer the money into next year's budget. Such a move would run afoul of Jindal administration policies against using one-time money for continuing state expenses, but Keaton said the shortfall is too severe to depend solely on cuts.
"Relying too heavily on budget cuts to solve the problem could have a destabilizing effect on core programs and might damage the state's prospects for a normal recovery after the budget crisis has passed," he wrote.
Other options offered by Keaton included reversal of tax breaks granted when the state was awash in surpluses, fee increases to cover the costs of services and reevaluation of whether certain pools of money should be free from budget cuts. Jindal has said he won't support any tax increases to close the budget gap.