BATON ROUGE, La. (WAFB) - As concerns over infectious diseases and overseas political spats drive oil prices down, Louisiana lawmakers are cautiously watching to see whether it will impact budget negotiations.
Every time the price of an oil barrel drops by $1, Louisiana loses an average of $12 million in direct tax revenue, legislative economist, Greg Albrecht, says. Some of that lost revenue would be offset by other factors resulting from low oil prices.
The state’s latest budget proposal assumes oil will sell between $55 and $60 per barrel. In the last three days, oil has been selling between $30 and $40 per barrel.
“If that number stays [low] for a long period of time, that’ll have a devastating affect on the budget,” Sen. Cameron Henry, R-Metairie, said.
Before the oil market shifted, the state was slated to bring in more revenue than expected. That expectation has not formally changed in the Revenue Estimating Conference (REC), so Governor John Bel Edwards and other lawmakers still hope to invest that extra cash, primarily, in education.
Given that the oil market could rebound, Albrecht says he would only make significant revisions to his economic forecast if the low prices linger for two or three months. Oil and gas revenues account for roughly 5% of the state’s revenue collections, representing dramatic diversification of the state’s economy over the last four decades.
“You’ve probably seen more in the space of IT, computer science, and cyber security-related industries coming to the state,” Louisiana Economic Development Assistant Secretary Mandi Mitchell told the House Committee on Commerce Tuesday, March 10. “That’s been intentional.”
The United States economy is entering a record 11th consecutive year of economic growth, though lawmakers also understand that growth will not continue forever.
Whispers about a looming recession have resumed at the capitol, though that would be a worst case scenario. The state’s economists are preparing for a “slowdown" triggered partly by coronavirus concerns and falling oil prices.
“If it’s going to happen, it’s going to happen soon,” Albrecht said, adding that concerns about a recession are “legitimate" and "warranted.”
“Obviously, it’s far too early to speak with any specificity on that,” Gov. Edwards’ said when asked about the new coronavirus’s impact on the state’s economy. “There will be an impact. It will be adverse. That much we know.”
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