A return to budget shortfalls?

A return to budget shortfalls?

The Joint Legislative Committee on the Budget met on Tuesday, and heard from state economists who project an $808 million budget shortfall – the difference between projected revenues and expenses – for the 2023-24 fiscal year that starts next July. While that figure is guaranteed to change in the months ahead, and doesn’t necessarily mean that budget cuts are coming next year, it’s a sign that the current era of revenue growth and year-end surpluses may be ending. Louisiana isn’t alone. As Pew’s Page Forrest reports, states across the country have enjoyed record revenue growth but are bracing for a possible recession. One way states can ease the effect of financial downturns is by conducting periodic “stress tests” to help determine how much money they should keep in reserves: 

In New Mexico, legislative and executive branch economists produce stress tests four times a year as part of the state’s consensus revenue forecasts. The testing has focused on energy revenues and what might happen to the state’s economy if it is hit by an oil price shock or sharp production decline. These analyses have shown that the state’s general fund reserve needs to be maintained at a rate of 20%-25% of the state’s annual general fund expenditures to help the state weather an oil price shock.

Louisiana has about $720 million socked away in its Rainy Day Fund – which is 6.5% of the $11.1 billion state general fund. 

Has inflation peaked?
Falling prices for gasoline, airfare and used cars offset increases in the cost of rent and groceries, keeping inflation flat for the month of July – better news than economists had been expecting and a possible sign that inflation has peaked. The new monthly figures mean that year-over-year inflation was 8.5% – down from 9.1% the previous month. The New York Times’ Jeanna Smialek reports that it’s too early for a victory lap: 

(A) big chunk of the pullback in July came from dropping gas prices, as the average cost of a gallon of fuel began to fall back toward $4 after peaking at $5 in June. Fuel costs are notoriously volatile, and with Russia’s invasion of Ukraine injecting heightened geopolitical tensions, officials are unlikely to stake victory on a slowdown that could quickly reverse itself. That said, the report contained other good news: Airfares came down in price, which was expected, but so did the cost of apparel, hotel rooms (and) used cars. The slowdown in core prices, which strip out volatile food and fuel costs to give a sense of the underlying trend, was more pronounced than economists had expected.

Our understaffed juvenile justice system 
Louisiana’s struggles to staff its juvenile justice facilities has prompted state officials to waive a requirement that job candidates pass a computerized test aimed at identifying potential pedophiles. While applicants who fail the “Diana Screen” are still required to pass a four-hour, one-on-one assessment with a psychologist, the weakened standards highlight the struggles of the Office of Juvenile Justice to fill low-paying jobs that are often dangerous and are supposed to help rehabilitate children who’ve run afoul of the law. The Louisiana Illuminator’s Julie O’Donoghue reports:

(Deputy Secretary Bill) Sommers (of the Office of Juvenile Justice) repeatedly mentioned during the legislative hearing that the Office of Juvenile Justice was struggling to hire and retain staff. There are currently 320 vacancies,  and Sommers believes low staffing contributed to the recent violent outbursts and escapes at facilities for incarcerated youth. … Legislators have suggested the Office of Juvenile Justice has problems hiring because their facilities have a reputation for being dangerous places to work. The pay, at $37,000 per year for a guard, is also low. Sommers and other juvenile justice administrators said one of the agency’s challenges is that many job applicants are being automatically disqualified during the hiring screening process.

Text messages keep people connected to benefits 
It’s crucial for state agencies administering benefit programs to effectively communicate with recipients, so that they know what they have to do to meet renewal deadlines, send documents to state agencies and keep up to date on their benefits. As the Center on Budget and Policy Priorities’ Maani Stewart explains, text messaging is a key tool for state agencies that oversee programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) to keep people connected to the benefits they qualify for. Louisiana’s recent experience provides proof: 

With the majority of adults in the U.S. ― 97 percent ― owning a cellphone, automated text messages are an effective and efficient tool for improving client communication in programs such as Medicaid and SNAP. For example, a pilot program in Louisiana sent text reminders about renewals to clients, which resulted in 10 and 19 percentage point increases in successful Medicaid and SNAP renewals, respectively.

Stewart explains how state agencies face a daunting task of administering economic security and health programs when the federal Covid-19 Public Health Emergency ends, and how text messages can help. 

State agencies administering economic security and health programs such as Medicaid and SNAP will soon face a significant increase in workload when the PHE ends. At that point, state agencies will need to resume regular operations, including Medicaid renewals for enrollees who may not have been in contact with the Medicaid agency for over two years, and unwinding of pandemic-related SNAP benefits. Many enrollees also may have moved during the pandemic without updating their contact information with the agency. As the PHE expiration approaches, states can take proactive steps to reach enrollees, including through text messages, to ensure eligible enrollees maintain continuity of benefits and understand programmatic changes.

Number of the Day
8.5% – Year over year increase in inflation for the month of July. This is down from 9.1% from June. (Source: Bureau of Labor Statistics)