Friday, February 27, 2015

Friday, February 27, 2015

Budget debate to focus on tax credits; Legislators may broaden tax exemption debate; and Will Common Core become part of the budget fight?

 

Budget debate to focus on tax credits

Gov. Bobby Jindal’s administration will present its final budget recommendations to members of the Joint Legislative Committee on the Budget this morning, ending weeks of speculation and handwringing over deep cuts to higher education and health care. After years of refusing to revenue increases, the administration will recommend making 12 refundable tax credits nonrefundable, saving $526 million. Melinda Deslatte with the Associated Press has the inside scoop:

 

The savings would be split, with $154 million going to health care and the remaining $372 million going to higher education, according to Commissioner of Administration Kristy Nichols, the governor’s top budget adviser. Tax credits that would be capped include for wind and solar systems, research and development projects, musical and theatrical projects, sugarcane trailer conversions, milk producers, historic residential rehabilitations and vehicles conversions to alternative fuels.

 

The priciest tax credit on the list for scale-back is the inventory tax credit, a more than $400 million tax break that refunds businesses for payments of certain property taxes assessed by parish governments. Attempts to curtail that spending could face pushback from businesses.”Whether or not we want to subsidize corporations who don’t have a tax liability versus prioritize higher education and health care, that’s the choices we have to make,” Nichols said.

 

Even with the refundable credit changes, colleges still face $200 million in cuts and health care would get chopped by $235 million. The administration’s plan also includes a massive–and complicated–fee hike on college students, paired with a new tax break for families to offset the fees, all paid for with higher tobacco taxes. The strange arrangement–rather than just raising the tobacco tax and giving the money to colleges–appears to be an attempt to keep the proposal “revenue neutral” by the governor’s esoteric definition.

 

Legislators may broaden tax exemption debate

While Gov. Bobby Jindal is taking a big step today by making refundable tax credits part of the budget discussion, some legislators want to broaden the discussion to include all of Louisiana’s tax exemptions and business incentives. But to do so, they will have to get around the governor’s objections, the Advocate’s Mark Ballard reports.

 

“It’s a big step in the right direction and certainly encouraging that the administration is softening its stance,” said state Rep. Tim Burns, R-Mandeville. “But we need a wider conversation on tax credits and exemptions. I come from a starve-the-beast district. At some point, you can’t kill the beast. We need health care; we need the schools…sometimes there are appropriate ways and appropriate times to raise revenues.”

 

Burns is not talking about raising taxes; he is talking about reviewing each exemption and credit. That’s activity that Burns says some would view as being for tax increases, which is the political death knell for a Republican, particularly one from the north shore. It’s not, he said.

 

“I don’t know the verbiage that is politically correct,” said Republican state Sen. Fred Mills, from his Breaux Bridge office at the Farmers Merchants Bank & Trust, where he is president and chief executive officer. Some of the tax incentives have not produced as promised. “It looks like we can have a huge discussion on how we can cut hospitals,” Mills said. “But when you’re ready to have the discussion on the exemption and tax credit side and whether we really got a return on investment, that seems to be a taboo discussion.”

 

Will Common Core become part of the budget fight?

In recent weeks, most of the budget talk has centered on cuts to higher education. But the Advocate’s Will Sentell reports that the Department of Education could be facing cuts as well. And there is some speculation that the very public split between Gov. Bobby Jindal and education chief John White over their differing views on Common Core could play a role.

 

State aid for public schools, dollars for standardized test contracts and funding for the state Department of Education are all in play in the budget amid Louisiana’s $1.6 billion shortfall to maintain current spending. White said earlier this week that he is concerned Jindal’s budget proposal will exclude dollars for standardized tests, which White said could imperil $800 million in federal aid. Stafford Palmieri, assistant chief of staff for the governor, countered that White, like other agency heads, will be required to trim his department’s budget but will have some discretion.

 

Number of the Day

$526 million – Amount of refundable tax credits that the Jindal administration will proposes reducing, with the savings going to higher education and health care (Source: Associated Press)