updated 11/6/2005 5:22:33 PM ET 2005-11-06T22:22:33

Hurricanes Katrina and Rita decimated city neighborhoods, parishes and livelihoods across Louisiana, and the cost was still rising Sunday as the Legislature headed into a special session to deal with the crisis.

The agenda for the 17-day session runs the gamut, from shifting the oversight of levees to offering tax relief for businesses and residents recovering from the storm.

Overshadowing anything lawmakers do will be the gaping hole in the state budget — a deficit already estimated at nearly $1 billion in an $18.7 billion budget for the 2005-06 fiscal year.

Gov. Kathleen Blanco took an ax to state spending on Saturday, cutting $431 million from state agencies almost across the board, including a $222 million hit to health care services and a $71 million cut in spending on public colleges.

The Legislature could restore that money, but the state constitution still requires a balanced budget, and estimates of lost tax revenue and recovery expenses have been rising.

“State government must work leaner but smarter than ever before,” the Democratic governor said as she set out her plans for the special session.

Blanco is asking lawmakers to tap at least $153 million of the state’s “rainy day” fund and borrow money to help the state cope.

She also is backing a statewide building code and unified state oversight of the levee system that provides hurricane protection for New Orleans and other parts of the state.

Katrina hit Louisiana on Aug. 29, damaging levees, flooding large parts of New Orleans and neighboring parishes, and killing at least 1,050 people in the state. On Sept. 24, while thousands of residents were still living in shelters, Rita dealt another blow to the region.

‘Smarter, safer and stronger’
“We cannot simply re-create what those storms destroyed,” Blanco said. “We must make the new Louisiana, smarter, safer and stronger.”

Businesses suffered both from the storms’ damage and the loss of customers, and lawmakers are expected to consider tax breaks during the special session to help them rebuild. Among the possibilities are the removal of a tax on manufacturing machinery bought in the disaster areas, the removal of a corporate franchise tax on new debt in the hurricane-ravaged region, and a cap on the sales taxes businesses pay on utilities.

For residents, the governor is suggesting property tax breaks and a statewide sales tax holiday for one day in December.

Though Blanco initially proposed a limited special session, with a more expanded agenda for a planned special session in January, lawmakers pressured her for more immediate relief efforts. Her framework for the November session mushroomed into dozens of topics that legislators are allowed to consider. Legally, the session must end by Nov. 22.

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