Not The Fall, But The Sudden Stop At The Bottom

Jan 2, 2018

Credit Sue Lincoln

"This is now becoming not an exercise on paper, and a 'what-if?' – it's about to become reality."


Commissioner of Administration Jay Dardenne was referring to the fiscal cliff, during the most recent Revenue Estimating Conference meeting. Dardenne then asked the Office of Planning and Budget’s Manfred Dix for an analysis of the ripple effect of cutting a billion dollars from the state budget.

"I just want to get us thinking in terms of the consequences of the cliff, beyond just the raw cut to state government — how it's going to impact the economy as a whole," Dardenne stated.

"The consequences are fairly dire," Dix began.


"So it's a one-billion dollar reduction in sales taxes, and a $4.5-billion reduction in total budget, including state budget and federal money, specifically in the health care sector," he said, establishing the parameters of his projections.


"Total employment would fall in the order of 110,000 jobs all throughout?" Dix stated. "Gross domestic product would fall by about $7 billion. Personal income would fall by, more or less, a similar number — between $6 - 7 billion."


Dix says the ultimate impact to state revenues would far exceed the simple removal of a billion dollars in taxes.


"Overall tax collection would have also a big multiplier effect,” he explained. "Because of the reduced economic activity, there would be a substantial less tax collection, especially in the sales and income tax collection."


Dardenne, who will be presenting the executive budget proposal Jan. 19, reminded the panel there's currently no alternative to stepping off the cliff.


"This is now the number we’re going to be living with, and if there’s not any revenue raised between now and the time that the Legislature considers that budget, that will be the budget for the state of Louisiana."