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Louisiana's budget gap has grown again, now projected at around $850 million, with only four months remaining to rebalance the state's spending plan


BATON ROUGE, Louisiana — Louisiana's budget gap grew worse Wednesday, reaching a projection of about $850 million and placing government services at risk of deep cuts, with only four months remaining to rebalance the state's spending plan.

The state income forecasting panel, called the Revenue Estimating Conference, downgraded tax revenue projections, with economists saying collections across nearly all tax types are far lower than expected.

"We've got weakness in the corporate sector. We've got weakness in the personal income sector. We've got weakness in the sales tax sector. We've got weakness in the mineral sector," the Legislature's chief economist Greg Albrecht said.

His assessment: "We're entering what amounts to a state recession. And it's come on pretty rapidly."

The downturn, Albrecht said, is being driven by plummeting oil prices and the spill-out effect across the economy.

Next year's problems are even bigger, with a more than $2 billion shortfall projected. But first, Gov. and lawmakers have to rebalance this year's $25 billion budget and close the $850 million gap before the financial year ends June 30.

Edwards is asking lawmakers to raise taxes in a special session that begins Sunday. The Democratic governor announced that he's going to make his case for the tax hikes in a TV address to be broadcast statewide Thursday night.

"Louisiana faces an unprecedented budget challenge that, if left unresolved, will devastate state government as we know it and impose unimaginable cuts to higher education, health care and other vital services the state delivers to our citizens," Edwards said in a statement. "This is a fiscal crisis, the likes of which we have never seen."

This year's budget shortfall is two-pronged.

The Revenue Estimating Conference dropped Louisiana's income forecast by $542 million Wednesday, in response to the lagging tax collections.

In addition, former Gov. and lawmakers didn't fully pay for all the programs they included in the budget, including Medicaid, the TOPS free college tuition program and the public school financing formula. That funding gap is pegged at around $300 million.

To close the hole, Edwards is proposing to tap into the state's "rainy day" fund, redirect Gulf oil spill recovery money earmarked for a legal settlement and reduce some spending. The governor also is suggesting a sales tax increase, boosted taxes on cigarettes and alcohol, and reduced spending on certain tax breaks.

For next year's financial gap, he's seeking further tax increases.

Republicans are showing resistance to the tax proposals, saying they want to look first at ways to shrink government programs. Edwards said the budget problems are too large to address solely with cuts.

In addition to revising this year's forecast, the Revenue Estimating Conference also dropped tax collection estimates by $744 million for the fiscal year that begins July 1, boosting that projected shortfall to more than $2 billion.

The estimating conference is made up of the House speaker, Senate president, the governor's budget adviser and an independent LSU economist. To change a forecast takes a unanimous vote.

The bleak budget revisions came on Ash Wednesday, the start of the Lenten fasting and prayer season for Christians. Albrecht noted the connection: "I think we're giving up quite a bit for Lent here."

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