Monday, June 1, 2015

Monday, June 1, 2015

Budget fix? What budget fix?; Navigating those “swim lanes”; Fees vs. taxes; A stronger EITC helps families; and The public gets a say


Budget fix? What budget fix?

Much ink has been spilled detailing the legislature’s machinations as they try to piece together next year’s budget given the $1.6 billion shortfall and the governor’s odd “swim lanes” restricting revenue raising measures. But less has been said about what comes after that. On Sunday, the Advocate’s Tyler Bridges looked into the crystal ball. It isn’t pretty.


The governor and legislators elected in the fall are likely to face a $1 billion budget hole when they take office in January because of the one-year patches in the budget that legislators are proceeding to approve now. “We have reduced some tax credits, rebates and exemptions,” House Speaker Chuck Kleckley, R-Lake Charles, said in an interview. “But I clearly believe that the next governor and Legislature will have challenges to face. There’s not enough time to do everything we need to do.”


The new governor and Legislature seem likely to inherit budget deficits of at least $1 billion not just next year but as far as the eye can see…It’s already clear that the budget will be balanced with one-year fixes for ongoing expenses — at least $524 million of them, according to a May 25 report from the Legislative Fiscal Office.


“I think it will be duct-taped, and I doubt it will be truly balanced,” said state Treasurer John Kennedy, a Republican who is often at odds with Jindal on spending matters. The $524 million in one-time fixes includes $50 million from the tax amnesty program that is ending; $124 million from a one-year paydown in debt service that won’t be available next year; $42 million in disaster relief money for higher education and health care programs that won’t be available next year; and $103 million through a one-year suspension of tax breaks for business that the House has approved and that is awaiting Senate approval.


Navigating those “swim lanes”
The biggest obstacle to a responsible balanced budget that protects higher education and health care is the fact that it has to meet the strange anti-revenue guidelines laid down by Washington lobbyist Grover Norquist in order to win the governor’s signature.


The key to gaining Jindal’s approval appears to be a convoluted scheme to drastically raise college and university fees, but offsets any impact on students with a new “tax credit” financed with other tax hikes. The idea faces resistance in the Legislature, with opponents calling it a “shell game” and “smoke and mirrors” needed to satisfy the “stupid pledge” the Gov. Jindal made to Norquist. Again, Tyler Bridges with the Advocate has the story:


The key to the entire effort is SB284, which would create what supporters call the SAVE fund but which faces strong resistance. “There’s broad concern among Democrats about the proposal, and I’ve heard that from Republicans, too,” said Rep. Walt Leger, D-New Orleans and the speaker pro tem. If the bill doesn’t pass, lawmakers say they will likely face a showdown with Jindal by proceeding to pass a budget that he would veto for raising taxes. In all, legislative leaders say passage of the measure could allow Jindal to accept $350 million of the $500 million or so that the other measures would raise. But the bill is causing significant angst among legislators because it would essentially lead to a phantom fee per student and offsetting tax credit to create the $350 million on paper that Jindal could apply against the other revenue-raising measures. Another concern: It would create a tax credit for the tax-exempt higher education institutions.


The House Ways and Means Committee cancelled its Monday meeting, when members would have voted on the SAVE scheme, to give more time for negotiations. There is less than two weeks left in the session, which must end by  June 11.


Fees vs. taxes
While Gov. Jindal has spent most of the last eight years railing against taxes, he has experienced little heartburn over raising fees on college students and drivers, among others. According to Jim Beam of the Lake Charles American Press, the trigger happy attitude toward fees is a cop-out.


Taxes are taboo with the Gov. Bobby Jindal administration, but it hasn’t met a higher fee it doesn’t like…As for fees, they should actually be called hidden taxes. Those who pay them are usually unaware that the government services for which they are paying contain those fees.  College students and their parents know what paying higher fees is like. They are paying higher tuition and fees because the Jindal administration and the Legislature cut higher education to the bone over the last seven years. Defenders of these fee increases often justify them by saying they are necessary because it is costing more for state agencies to provide citizen services. That is true to some extent, but fees are also increased in order to avoid having to vote for higher taxes.


A stronger EITC helps families
The Earned Income Tax Credit (EITC) is one of the government’s most effective anti-poverty tools. It supports families that work and is targeted to low-income families with children. It has had bipartisan support on Capitol Hill for two generations, and has been in place at the state level in Louisiana since 2007. This afternoon members of the House of Representatives have a chance to boost this tax credit. House Bill 70 by Speaker Pro Tem Walt Leger III would double the existing state credit from 3.5 percent of the federal credit to 7 percent. This would put $47 million a year into local Louisiana communities by giving working families more money to spend on basic necessities. Click here to read more about the bill, and the benefits of enhancing this critical tax benefit.


The public gets a say
Saturday marked an annual weekend tradition in the Senate Finance Committee, as the only item on the agenda was a chance for the public to give personal testimony on the state budget. Julie O’Donoghue with tells the story through pictures and personal stories. Among others, parents of children with severe disabilities came to plead for more funding for in-home health services, the school board association asked for more funding for K-12 students to keep up with rising inflation, and early childhood advocates made the case that Louisiana should invest more in its youngest citizens.


Number of the Day

$524 million – Amount of funding in the proposed state budget that will only be available for one  year (Source: Legislative Fiscal Office via The Advocate)