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Louisiana forecasts budget deficits for next three years

Shortfall could hit $844 million for 2006 fiscal year
By The Associated Press

Even with all the usual budget-squeezing tricks, Louisiana could face deficits of $500 million to around $1 billion over the next three fiscal years, officials say.

Last year at this time, budget analysts were projecting a $321.5 million shortfall for the current 2005 budget year.

The state produced a $43.9 million surplus last year and appears to be solvent again this year, State Budget Office officials told the Joint Legislative Committee on the Budget on Friday.

Federal changes in the Medicaid program and required increases in education spending are expected to increase general fund appropriations from $6.2 billion this year to $7 billion next year.

Given expected revenue and spending, the state faces a likely deficit of $844 million for the 2006 fiscal year beginning July 1.

That rises to $969 million for fiscal year 2007 and $1.1 billion the following year.

The state must balance its budget each year, so the government must either cut spending, find new money, or, most often, both.

The governor and Legislature improvise every spring to make that happen.

Many government agencies probably will forego or absorb pay raises, inflation increases and higher retirement system payments and take other expense-control measures. That could cut next year's anticipated deficit by about $262 million, still leaving the state nearly $500 million in the hole, officials said.

Most of the expected spending increase is tied to the federal government putting more of the Medicaid burden on states. In addition, Louisiana must increase the money given to school systems by about $89 million next year. Money for public hospitals will increase by $83 million.

This year, higher oil and gas prices are translating into $95 million to $125 million more in state net mineral revenue than had been forecast previously. About $45 million of that amount can be captured for the current year's budget, and the rest will go into the state's rainy day fund.

There is no assurance that energy prices will sustain their high levels next year.

Gov. Kathleen Blanco has said she is willing to consider changing state law so the state can put more of any future mineral revenue windfalls directly into the general fund rather than into the rainy day fund.

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