Falling Oil Prices Hurting State Budget
There are generally two schools of thought on the current trend in oil prices. One school is thrilled with lower prices for gasoline. The other schools is depressed because of the loss of jobs within the state. There could be a a third school of thought regarding oil prices and it's a school we all happen to be a part of. The lower prices for oil are adversely affecting the state of Louisiana budget. By the way that budget is in no shape to be affected in a negative way.
I think the original budget for this year was built on $63 a barrel oil. I think the forecast has been downgraded into the 40s, but I think it's going to have to be dropped again.
That's what Jan Moeller the Director of the Louisiana Budget Project told the Louisiana Radio Network. Yesterday the price of oil closed below $27 a barrel. If you're budget is based on oil prices at $63 per barrel you don't have to be an economist to see the incredible shortfall that is taking place.
Our state uses oil prices to project what revenues will be generated via mineral revenues plus corporate taxes and sales taxes from employee spending. When those numbers are reduced, the state's budget gets reduced.
That causes sharp drops in corporate income tax collections, individual income tax collections, sales tax collections.
A reduction in money available to the state will mean a reduction in state services. It could also mean less money available for roadways and higher education funding. That's why it's very important that our current Governor and state legislators make sound decisions regarding the now limited revenues that will be flowing into the state's coffers.