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BATON ROUGE, La. (WGNO) — Higher education is just one area set to face major cuts in the next round of budget talks, set for later this month.

Louisiana will face a $200-$300 million budget shortfall this fiscal year and if the price of oil keeps dropping, Louisiana State Treasurer John Kennedy says that number could be $1.2-$1.6 billion next fiscal year.

40% of the Louisiana economy relies on the oil and gas industry. Louisiana’s budget is based on crude oil selling for roughly $81 per barrel.  It’s currently selling for less than $50.

For every dollar, the price of a barrel of crude oil drops, the state loses $12 million.

However, Treasurer Kennedy says overspending is the real problem.  He told Good Morning New Orleans’s Anne Cutler the state needs to stop spending more than it takes in.  He says we would still have budget problems even if the price of oil hadn’t dropped.

Kennedy suggests reducing Louisiana’s 19,000 consulting contracts by 10%, which could save the state $100’s of millions.  He also suggested ‘changing’ spending on Medicare.

Kennedy told WGNO there are two rules, “One, stop spending more money than you take in.  Two, when you do spend money, spend it on things you need and not just things you want.”