La Budget forecast: From bad to worse
What’s been rumored for months became official on Wednesday morning: Louisiana’s current-year budget shortfall grew to at least $850 million – and next year’s gap between revenues and expenses tops $2.1 billion – as state tax revenues continue to plummet due to low oil prices. While the news from the Revenue Estimating Conference was not entirely unexpected, it made the Legislature’s job considerably more difficult as it convenes for a three-week special session starting on Sunday where the main goal is finding enough revenue to plug the holes. Gov. John Bel Edwards has scheduled a special address to the state for 6:30 p.m. on Thursday to discuss the historic challenge.
The AP’s Melinda Deslatte’s initial report on the budget forecast is here. A statement from the governor is here, along with a separate section that gives answers to common questions about the budget crisis. Greg Hilburn of Gannett offers his analysis here, while Julia O’Donoghue of Nola.com/The Times-Picayune weighs in here. Perhaps the most succinct case came from longtime chief economist Greg Albrecht of the Legislative Fiscal Office, whose forecast was the basis for the downgrade: “We’re entering what amounts to a state recession, and it’s come on pretty quickly.”
The Obama budget
President Obama presented his eighth and final budget to Congress on Tuesday. And while it’s unlikely that much of what he proposed will make it into law, Bob Greenstein of the Center on Budget and Policy Priorities writes that it’s a strong proposal that would simultaneously reduce the federal deficit while making needed investments in families and children.
Specifically, the budget features initiatives to substantially expand access to high-quality child care and preschool education for many children, especially from families with modest incomes. It includes $10 billion over ten years to expand the home visiting program, an evidence-based program that’s proven successful in helping low-income parents be better parents and thereby improve their children’s life chances. It would commit $11 billion over the decade with the goal of eliminating homelessness among families with children. The budget proposes $12 billion over the decade to provide low-income children with supplemental food benefits in summer months when school is out and children lack access to free or reduced-price school meals. That’s another evidence-based initiative; demonstration projects that were rigorously evaluated found this supplemental nutrition assistance reduced food insecurity among low-income children in the summer and improved their diets. The budget also includes a long-overdue funding boost for the Temporary Assistance for Needy Families block grant, which has been frozen for 20 years without any adjustment for inflation and, thus, has eroded substantially in value.
Homeless in Baton Rouge
Being homeless isn’t easy for anyone. But it can be particularly hard on women with children, as there aren’t nearly enough shelter beds for those who seek them or services to help them get back on their feet. But The Advocate’s Andrea Gallo reports that the Society of St. Vincent DePaul is trying to raise money for an expansion of its existing women’s shelter that would nearly double its capacity. But it still won’t be enough to meet existing demand.
Capital Area Alliance for the Homeless Executive Director Randy Nichols said homelessness numbers reflect high poverty rates and insufficient affordable housing options. A recent report noted that East Baton Rouge Parish had a “poor” availability of affordable homes, while 35 percent of households don’t have enough money to make ends meet. The overall number of homeless men in Baton Rouge, at 462, dwarfs the number of homeless women. But more beds are available for men. Nichols said it can be more difficult to rehouse women with children, whereas men are often alone. And homeless children are more likely to suffer from developmental delays and poor educational performance, he said. The problem is not as simple as finding them a place to stay for a few nights. Nichols said the key is to find sustainable housing that people can afford.
Oil prices ‘wreaking havoc’ on debt
Louisiana isn’t the only place where plummeting oil prices are having economic ripple effects. The New York Times travels to the oil patch city of Midland, Texas, for a look at the way energy firms are retrenching and fighting for survival after years of riding high.
Energy executives and their bankers are bracing for a prolonged downturn that could remake the energy industry in a way not seen since the turmoil of the late 1990s gave rise to mega-mergers like Exxon Mobil. If prices hold at such low levels — oil traded near $28 on Tuesday — as many as 150 oil and gas companies could file for bankruptcy, according to IHS, an energy research firm. While that represents a relatively small slice of the overall industry, there are hundreds of other companies that had piled on debt to grow from tiny start-ups into significant players in the nation’s shale oil boom. Now they are likely to be acquired or their assets sold off. As much as a third of the oil industry could be consolidated as a result of the downturn, according to one estimate.
Number of the Day
$850 million – Estimated gap between revenues and expenses in the current fiscal year, according to updated revenue forecast. (Source: Revenue Estimating Conference).