BY SAM KARLIN | STAFF WRITERTHE ADVOCATE – UPDATED APR 30, 2020 AT 8:29 PM
Visitor’s seats in the back of the House chamber are taped off not to be used as the Louisiana Legislature convened at 11 am for a short time to move bills on legal calendar and to introduce contingency measures for budget and capital outlay Tuesday March 31, 2020, in Baton Rouge, La. Everyone was sitting with a space between them and keeping the social distance guidelines.STAFF PHOTO BY BILL FEIG
As Gov. John Bel Edwards signs an extension of the state’s stay-at-home order until May 15, Louisiana’s state and local governments Thursday face dire losses in revenues as the coronavirus pandemic has dried up tax streams, just months after lawmakers began a legislative session under the impression they had millions in extra money to spend.
And despite $1.8 billion in federal aid coming to Louisiana’s governments, that money can’t currently be used where some officials say it is most needed – to fill massive holes left by lost tax revenue.
State leaders including Edwards are pushing for more flexibility in that funding, which is being sent to Louisiana as part of a $2 trillion federal stimulus package. About $810 million is earmarked for local governments.
Meanwhile, a push is underway in Congress to send additional aid to state and local governments. U.S. Sen. Bill Cassidy has proposed a $500 billion fund to aid states and localities, and he noted Louisiana has been hit particularly hard by the coronavirus.
Edwards noted Thursday that Louisiana is unable to run a deficit like the federal government. That means any losses in tax revenues must be made up by offsetting cuts to services. He also said it “doesn’t make sense” to not be able to keep first responders employed because of budget crises when residents are using some public services more than ever.
“Without some help from them, I can assure you the cuts will be much more drastic than they would otherwise be,” Edwards said.
About 10% of Louisiana’s state revenues come from severance taxes, and oil prices have crashed, leaving that revenue stream uncertain. Meanwhile, hundreds of thousands have filed for unemployment, including nearly half of food services and accommodations workers, according to research from Stephen Barnes, an economist at the University of Louisiana at Lafayette. The state relies heavily on sales taxes, which are expected to drop precipitously, and it is not clear how fast they will rebound as the country enters a slow-moving economic reopening.
That has turned Louisiana’s state budget, once a rosy prospect, into a minefield as lawmakers prepare to return to session Monday to start sorting through the finances.
It’s not clear how much the state will lose. Economists will create a projection by May 11th, but they may come back as more information becomes available, Senate President Page Cortez said at a news conference.
Republican Sen. Bodi White, the chairman of the Senate Finance Committee, said the shortfall for the upcoming fiscal year could range from $500 million to $1 billion. He said lawmakers and staff are unclear on exactly how the $1.8 billion in federal aid can be spent or how big the funding gap will be. He also noted universities are among the institutions to get direct federal aid, to the tune of nearly $150 million.
“Is everybody going to be made whole? I don’t think so. I think that’s impossible,” White said. “Most big departments should be ready for some cuts. It’s just a fact of life.”
In New Orleans, where the city is facing a shortfall of an estimated $150 million, mainly because of lost revenue, Monika Gerhart, director of state relations, said officials are trying to determine how exactly they can tap into the $810 million in federal aid set aside for local governments. The city has incurred additional costs from things like overtime for emergency personnel, but the primary budget impacts are from lost tax dollars. She also said the city needs additional resources to fund housing, food insecurity and other aspects of an economic recovery.
“There are a lot of unknowns with eligible expenditures at this point,” Gerhart said. “The good news is Congress is beginning to understand and take the revenue losses across the U.S. seriously.”
Commissioner of Administration Jay Dardenne said this week he believes local governments might not have enough eligible expenditures to spend all $810 million, because the state has coordinated much of the spending on coronavirus resources and because it can’t be used to offset lost revenue.
Congressman Garret Graves, a Republican representing parts of Baton Rouge, said billions of federal aid is flowing to Louisiana, not including the $1.8 billion. Along with grants from various agencies, businesses are tapping into the massive Paycheck Protection Program, many individuals received a $1,200 check and unemployment benefits were boosted by $600 a week.
“There are all sorts of dollars that are being pumped into the economy,” Graves said. “You’re going to see implications on tax revenues as a result.”
And the $1.8 billion in aid from the CARES act can be used broadly, raising the prospect of aid programs to businesses or people in Louisiana, he said.
The Federal Emergency Management Agency is currently slated to pick up 75% of the tab on much of Louisiana’s coronavirus expenditures – things like protective equipment, temporary hospital facilities, ventilators and other gear purchased by Edwards’ administration. That is expected to rise to 90% once the state hits $662 million in expenses. As of Wednesday the state was at about $585 million. Officials are trying to use part of the $1.8 billion to cover the state’s portion of that spending.
Edwards on Thursday also blasted GOP state lawmakers who circulated a draft petition to cancel his emergency order on the coronavirus, saying it would put federal aid in jeopardy. He called the effort, promoted by Rep. Alan Seabaugh, R-Shreveport, “irresponsible and nonsensical.” The effort was the latest indication that bipartisanship in the coronavirus pandemic has largely ended between the Republican-led Legislature and Democratic governor.
“Silly is not the right word,” Edwards said. “It would be profoundly regrettable.”
Cortez said lawmakers consulted U.S. Rep. Steve Scalise, who cautioned the move could put some U.S. Small Business Administration funds at risk. Cortez and House Speaker Clay Schexnayder, both Republicans, said they did not support the petition to revoke the emergency declaration, but Republicans in the Legislature have widely criticized the governor’s extension of the order until May 15, which was signed Thursday.
Graves said he doesn’t believe the move would put federal dollars at risk, but he said he doesn’t support the idea. Instead, he suggested lawmakers should consider passing legislation to alter the governor’s emergency order to fulfill what has emerged as a GOP goal in the coronavirus reopening – to loosen restrictions at a regional or parish level, not a statewide level.
While Graves said he thinks Edwards has largely done a good job, he thinks the reopening should be done locally. But he said the state still needs to follow federal guidance on reopening – including encouraging masks, spacing out tables at restaurants and other social distancing measures.
“I don’t think fully rescinding an emergency order makes sense,” Graves said. “You’ve got to replace it with something that makes sense.”