Last week, Louisiana’s Revenue Estimating Conference
met
again with an attempt to update forecasting numbers on revenue. The figures
produced get fed into the budget process, with Democrat Edwards’ executive plan
for state spending in fiscal year 2020 due in about ten days.
Currently, recognized revenues reflect estimates
of nearly seven months ago. Two months ago, with the group mandated to meet no
later than the end of the year, it gathered to consider an increase because of
higher-than-expected oil prices. It had predicted throughout this fiscal year a
price of $59.42 per barrel, but the two sources used by the political appointees
– the Commissioner of Administration Jay Dardenne, Republican
House Speaker Taylor
Barras, GOP Senate President John
Alario, and university economist James Richardson – representing the Administration
and Legislature thought that should increase to the $61-64 range.
As the REC needs unanimity to change a forecast, Republican state Rep. Cameron Henry, attending on behalf of Barras, essentially vetoed that by refusing to go along. He cited a downward swoon in prices and uncertainty going forward. At the time, the spot price had dropped sharply in the preceding month to below not just the requested price, but the forecast one. It fell further over the next month to around $50 when Barras at another meeting didn’t approve of a change.
It recovered since, closing yesterday just below $54.
Using that and end-of-month prices since the beginning of the fiscal, the
weighted average is about $64. But the problem is, the U.S. Energy Information Administration
doesn’t see much upside from here over the next calendar year. It predicts a
final 2019 price (West Texas Intermediate crude is what the state uses as a
benchmark) of $54.19. If that’s
indicative of the first six months of the year, the state will have trouble
hitting its original estimate.
Thus, Barras prudently refused again in the last
meeting to hike the forecast. Given the metric that every buck change in price
equates to $12 million in revenue, at least $60 million is in question, or
about half of the claimed forecast revenue increase (other kinds of tax
collections have seen small increases to date above previous prediction). Maybe
if the REC had voted on an increase half that size, perhaps Barras could go
along with that.
But such a compromise as of yet doesn’t interest
Edwards. He wants it all and wants it now because not only would it permit him
to spend immediately $43 million in contingency items, but then it also would
raise next year’s baseline to let him grab a good chunk of money desired to
fund permanent, across-the-board pay raises for teachers and support staff.
Both serve as linchpins of a reelection strategy focused on distributing as
many goodies as possible.
Yet partisan political necessity cannot take
precedence over prudential stewardship of state dollars. Craven remarks made by
Dardenne, who hypocritically likened Barras’ resistance to gamesmanship that
would spur a budget of “fiction,” don’t change that fact. Speaking of fiction, consider
it was Dardenne’s office which claimed at this time last year the state needed $1 billion
more in new revenue, then it became around $650
million, and finally he acceded to the Legislature reinstituting tax increases
worth about $500
million – followed by news that the budget year that just ended produced a $300 million
surplus. Use car salesmen have more credibility in their claims and numbers
than Dardenne has shown.
Barras makes perfect sense when he counsels
waiting perhaps a month or two before pulling the trigger on any change. That would
occur well in advance of the Legislature’s regular session to construct a
budget, and will present more data to smooth out the volatility witnessed in oil
prices as well as in the overall economy (as demonstrated by whipsawing
indicators since the start of last December). It’s the prudent thing to do.
However, it’s not the electorally convenient thing
for Edwards, and that’s why Dardenne complains, putting the needs of Edwards ahead
of those of Louisianans.
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