When it comes to stabilizing Louisiana state government’s financial future, it’s difficult to be optimistic. The Legislature has gone from one money crisis to another over the last nine years.
Lawmakers just ended their third special session since Gov. John Bel Edwards took office over a year ago. They closed a $304 million budget deficit, the 15th over those nine years, but it was more difficult than it needed to be.
Two competing philosophies are at work. Hard-line Republicans, particularly those in the House, believe state government is too big and spends too much money. Edwards and his Democratic colleagues in the Legislature believe there are many poor and low-income citizens who need government assistance that is expensive.
The state also spends a sizable chunk of its nearly $10 billion in state revenues on local government assistance, which is unique to Louisiana.
Louisiana has no state property tax, which is a major revenue producer in many states. Local governments do levy property taxes, but they lose revenues through industrial property tax exemptions.
Most of the revenues in the state come from sales and personal and corporate income taxes, but both have too many exemptions and tax breaks. Some corporate breaks were taken away during last year’s special sessions, and business lobbyists haven’t stopped complaining.
The declining price of oil has had a heavy impact on both jobs and revenues, and legislative fiscal analysts believe the state is in a recession.
State revenues for the new fiscal year beginning July 1 are projected to be $9.5 billion, but the Edwards administration said the general fund needs $9.9 billion to perform basic state services. That’s why there is already a $440.5 million shortfall for fiscal 2017-18. The year after that the gap could be $1.5 billion because temporary taxes passed last year expire July 1, 2018.
Amidst all of this doom and gloom, taxpayers are looking forward to serious reforms of the state’s budget and tax systems at the regular session beginning April 10. The fact that all sides compromised to close that $304 million deficit has hopes high that it can happen again.
Rep. Chris Leopold, R-Belle Chasse, laid out the challenge when he told The Advocate, “The appetite for taxes is not there. We’ll have to do things we’ve never done before so we won’t be at the same fiscal crossroads every year.”
A recent task force and others before that one know what the solutions are, and Leopold is correct. Take the sales tax, for example. It’s the highest in the country and a 1 percent increase last year has to stay off the books when it expires July 1, 2018.
The solution being proposed is to make sales taxes apply to services like cable and satellite television, repairs to non-residential, commercial property and security services. Other states have made that transition to deal with the change in citizens’ buying habits.
Changing income taxes is a difficult proposition. Taxpayers could benefit from lower rates if they were willing to give up some deductions. The first year would be revenue-neutral, meaning income taxes wouldn’t bring in any more revenues that year.
Voters rejected a similar plan last November for corporate income taxes, which was surprising to many advocates of the idea. Edwards said voters may have thought is applied to them because they weren’t very well-informed about the constitutional amendment.
Republicans, particularly, don’t want anyone doing anything about income taxes. That is unfortunate because income tax revenues improve when personal and corporate incomes improve.
Jay Dardenne, state commissioner of administration and Edwards’ budget chief, told The Advocate the governor will soon decide on specific tax changes he will recommend for the April session.
Edwards said, “If my crystal ball is right, it (tax changes) will be harder to do that in April than it was today (end of special session), and of course, it wasn’t easy to get it done today. I’m optimistic, but I’m certainly not delusional.”
Two budget reform ideas are easier said than done. The latest task force said don’t budget more than you have in revenues and improve revenue forecasting, which is the job of the Revenue Estimating Conference (REC).
Taking the first step for the fiscal year starting July 1 means permanent cuts would be made to the TOPS scholarship program, the state Department of Corrections, the Louisiana Department of Health, the private-public partnerships that took over the state’s charity hospital system, tuition support for low- and moderate-income citizens and all state agencies.
Rep. Lance Harris, R-Alexandria and chairman of the House Republican Caucus, apparently sees no problem in that approach. He said when the latest task force issued its recommendations he wishes it had provided more details about how to cut state spending.
“If you get a good look at spending reform, then people would be more open,” Harris said.
The Advocate in a recent report quoted the state Department of Revenue that said state spending from state tax payments, fees and tuition has actually dropped 7 percent since 2009, while the amount of revenue not collected because of tax breaks has exploded by 41 percent.
The time for real reform has arrived and it’s long past time for reluctant legislators to bite the bullet and quit worrying about the next election. Compromise is the answer, but that is a tough sell these days.
Jim Beam, the retired editor of the American Press, has covered people and politics for more than five decades. Contact him at 337-515-8871 or jbeam@americanpress.com.
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