State $319M short

BATON ROUGE — Gov. Bobby Jindal said he and the Legislature will "do everything we can to mitigate cuts" to higher education and health care, but the plan for cutting or using other funds to fill a $319 million budget hole won't be complete until Friday.

Jindal said "everything is on the table" for consideration as ways to cover the shortfall — except increased taxes.

Action must be taken because the state constitution requires a balanced budget.

The Revenue Estimating Conference acceptance of Legislative Fiscal Office economist Greg Albrecht's estimate that state revenues are down $319 million set in motion talks among the governor and legislators on how best to handle the problem.

Senate President Joel Chaisson, D-Destrehan, said making the cuts at such a late date "is going to be painful."

Implementing any cuts at this time will be "very traumatic, very problematic," said Jerry LeBlanc, vice president for finance at the University of Louisiana at Lafayette.

LeBlanc served as chairman of the House Appropriations Committee while he was in the Legislature and later served as commissioner of administration — the chief financial officer — in the Gov. Kathleen Blanco administration.

"I don't recall that we've ever had two cuts in one year," he said. "Even when Katrina hit, we had just one midyear cut of almost $1 billion."

It's hard on all of state government, LeBlanc said, but particularly bad for higher education because the vast amount of budgets is salaries "and by this time in the year 95 percent of your budget is gone."

"It's really difficult when you have to make up all the cut in eight weeks," he said. "This late in the year there's less and less on the table and whatever's left takes a greater impact. Our options are dwindling. What's left we almost have to wipe out. On a college campus it comes to just about shutting down and massive furloughs."

LeBlanc said his university has adopted the philosophy "protect the academic core and protect the students."

Despite the almost frantic activity to drill natural gas wells in the Haynesville Shale area of northwestern Louisiana, the state can't depend on that as a bailout from the financial problems, Albrecht said. In fact, state severance tax revenues are down 18.5 percent.

The major reason, he said, is a 1992 law that was designed to stimulate directional drilling and other methods of extracting oil from abandoned wells. The law grants a two-year exemption from paying severance taxes, so the major production from Haynesville wells is tax exempt.

Don Briggs, president of the Louisiana Oil and Gas Association, says the major production in the shale area is in the first year of production, with wells producing about 20 million mcf per day.

At 31 cents per mcf (1,000 cubic feet), that could be major severance tax revenue for the state, but by the time the tax kicks in, wells will be producing an average of 400 mcf a day, Briggs said.

At 400 mcf, the state would get $124 a day per well at 31 cents severance tax.

Albrecht said the only way the state could get significant revenue is if there are a number of wells producing at that rate for a lengthy time.

Briggs said "several thousand" wells could be producing for 20-to-30 years, "some as long as 50 years, so the state will realize severance tax revenues."

The state is benefitting from all the investments drilling companies are making, he said. A study found $7 billion was spent in northwestern Louisiana on drilling operations in 2009.

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