ATLANTA - Louisiana Gov. Edwin Edwards said Monday that he would sign a $4.35 billion general-fund budget and $119 million in new taxes for fiscal 1994, both approved by legislators last week, ending the possibility that gridlock might set in when the new fiscal year begins on July 1.
The lawmakers' budget resolves a revenue imbalance for fiscal 1994 that officials had projected at about $618 million in March. The new taxes help avoid large spending cuts that would have otherwise been necessary to bring outlays in line with revenues, as required by state law.
"Gov. Edwards said today it is his intention to sign both the appropriations bill and tax increases," Payton Smith, the governor's spokesman said in an interview late Monday.
In a budget plan presented earlier this year, Gov. Edwards said he wanted to increase taxes by about $480 million to fund state services in fiscal 1994.
The budget approved by lawmakers compares with $4.23 billion of general fund spending in the current fiscal year, according to Greg Albrecht, chief economist at the Legislative Fiscal Office.
"Assuming Louisiana's budget is signed, and that the state can live within this budget, it is a hopeful sign," Jay Abrams, a director at Standard & Poor's Corp., said yesterday. "This is not the worst-case scenario by far."
Abrams said that Standard & Poor's Corp. will analyze the budget to make sure it "employs real cuts and real revenues." Any improvement in the state's rating, he added, would require "something more forward-looking in terms of the state's revenue structure."
"As we look at it, the present rating is very reflective of the difficulties Louisiana is having," Abrams said.
"Passage of a timely budget is important because it allows a state a full year to implement remedial action if needed," George Leung, managing director of state ratings at Moody's Investor's Service said yesterday.
Standard & Poor's has rated the state's GO debt at A since December 1990, when it raised the rating from BBB-plus. Some analysts expressed surprise when the rating agency reaffirmed the A rating in March, despite the state's looming fiscal problems.
Moody's rates Louisiana's GO debt Baal.
The legislators' revenue increase package will bring in an estimated $95.7 million in additional state sales taxes by eliminating exemptions to the one-cent tax currently charged by the Louisiana Recovery District, according to Albrecht. Groceries and utilities, which are currently exempt from the tax, would be taxed beginning on July 1.
Legislators also voted to change accounting procedures governing the taxation of corporations that do business in Louisiana. The changes would raise an additional $23.3 million, mostly from out-of-state firms, said Albrecht.
"It is not a pleasant situation, but in order to find revenues for the budget, for higher education, it had to be done." said Sen. Larry Bankston, D-Baton Rouge, in floor debate on the tax increases, which passed last Thursday.
The new taxes, which had been rejected in a special legislative session, allow the state to avoid some very painful cuts that would have been necessary without increased revenues.
For example, the tax increases add $72 million in funding to higher education. They also provide $12.65 million more to Medicaid programs. In addition, funding will be increased for a variety of other programs, including the Louisiana Health Insurance Association's catastrophic health plan.
In January, Edwards called for the $480 million in new taxes as part of a package designed to avert the state's projected fiscal 1994 budget deficit. Edwards plan called for 370 million in direct new taxes: $200 million from an increase in the gasoline taxes, $100 million from eliminating exemptions to the sales tax, and $70 million from a reimposition of property taxes. The governor's proposal would also have raised $110 million by ending the state's insurance tax credit and its credit for business inventory taxes.
A special legislative session that began March 14 considered raising taxes by $350 million, but the proposal died when Edwards refused to support it. The regular session began March 29.
Meanwhile, Louisiana lawmakers continue to debate a number of other issues of interest to municipal bond participants as the 1993 regular session winds down.
Legislation that would limit state bond issuance appears to be nearing approval, legislative sources said, with lawmakers working out differences between House and Senate bills that would link new sales of debt to yearly revenue collections.
Prospects for legislation that would authorize the state's Stadium & Exposition District to sell over $200 million of tax-exempt revenue bonds are cloudier, Albrecht said.
The proposed bond issue, which would refund the authority's existing debt and finance a variety of sports-related construction projects in the New Orleans area, is being resisted by lawmakers who think many of the proposed projects are unnecessary.
In any event, legislators hope to complete the session by the end of the week, Albrecht said.