Louisiana governor slashes state spending by $431 million but still faces deficit | VailDaily.com

Louisiana governor slashes state spending by $431 million but still faces deficit

BATON ROUGE, La. – Struggling with a huge post-hurricane deficit, Gov. Kathleen Blanco slashed state spending by $431 million Saturday, but even with the cuts, Louisiana still faces a budget shortfall of about half a billion dollars.The Democratic governor cut spending across state agencies, including social services, education and some lawmakers’ pet projects, but the deepest reductions were a $222 million hit to health care services and a $71 million cut in spending on public colleges.”State government must work leaner but smarter than ever before,” Blanco said in a statement.Lawmakers could still decide to reverse her cuts when they meet in special session starting Sunday.”Everything is on the table,” Sen. Francis Heitmeier, a Democrat from New Orleans and chairman of the finance committee, said last week. “If we don’t agree with the cuts they make, we’ll zap em.”Hurricanes Katrina and Rita displaced taxpayers, forced businesses to shut down and ripped through state tax income expectations for the fiscal year that began July 1.Lawmakers had passed an $18.7 billion state budget earlier this year, but the state’s revenue projections plunged by $959 million after the hurricanes – a deficit that must be addressed because Louisiana’s constitution requires a balanced budget.Blanco is backing a proposal to tap at least $153 million of the state’s “rainy day” fund and to borrow some cash to help deal with the rest of the shortfall. Both proposals would require approval from the Legislature during the special session.The state’s money problems are expected to be worse than the official deficit.The deficit only takes into account the loss of revenue in the state’s general fund, mainly shrinking tax income. It doesn’t include lost revenue that individual agencies get from items such as license sales and penalties – projected to be hundreds of millions of dollars – or the loss of federal matching funds.Making matters worse for the state, the Federal Emergency Management Agency last week estimated Louisiana’s bill for the federal hurricane recovery effort to be $3.7 billion.Blanco avoided cuts in some areas, including a college scholarship program, the military office spearheading hurricane recovery efforts, and road repair and construction money.

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