Monday, June 8, 2015

Monday, June 8, 2015

The home stretch: Budget in the balance; Budget will rely on short-term fixes; Louisiana’s budget woes get national attention; and Budget woes take their toll on Jindal

 

The home stretch: Budget in the balance

By 6 p.m. on Thursday the 2015 Legislature will be in the books, and chances are there will be a budget deal in place that balances the state’s revenues and expenses, at least on paper. But what that deal might look like is anyone’s guess at this point. Monday marks the start of four days of negotiations between the House and Senate and the governor’s office that will take place mostly out of public view. As Melinda Deslatte notes in her weekly column, the linchpin of a deal might be the much-derided “SAVE” bill that creates a phantom tax credit aimed at public colleges and universities.

 

Creating a tax credit — at least on paper — can be used as an offset to count against tax increases used to generate new money for the state’s budget, like a cigarette tax hike. And that matters very much to Gov. Bobby Jindal, so he can claim Louisiana didn’t raise taxes to balance the budget. Jindal, expected to announce his White House bid in New Orleans on June 24, won’t support any tax changes he — or national anti-tax activist Grover Norquist — considers a net tax increase. Protection of that record has bogged down the budget negotiations and stymied debate over how best to address the state’s financial problems. With a $1.6 billion budget shortfall for the fiscal year that begins July 1, lawmakers and the governor have acknowledged they must find ways to drum up new dollars to keep from devastating higher education and public health care programs. Senate President John Alario, R-Westwego, said a deal with Jindal can’t be struck without the tax credit bill. “You have to have this.”

 

On the House side, a group of Republicans are questioning the SAVE plan, and wrote an open letter to anti-revenue activist Grover Norquist that says the tax credit scheme could set a dangerous precedent for future governors who want to raise taxes while still currying favor with his organization.

 

Surely this cannot be what it means to adhere to the “no tax pledge” of your organization. If so, it would be profoundly ironic for ATR to suddenly become, albeit unintentionally, the most liberal and dangerous tax policy organization in the United States of America.

 

In Robideaux’s view, any tax changes approved by the Legislature this year should be measured against the panoply of tax cuts lawmakers have approved over the previous seven years. And by that standard, he says, their record on taxes satisfies the “revenue neutral” requirement that Jindal demands.

 

Budget will rely on short-term fixes

The state Senate takes up the $24 billion budget debate today after devoting a rare Saturday session to approving the rest of the revenue-raising measures that need to pass in order to avoid large-scale cuts to higher education, health care and other critical services. But despite the Senate’s efforts, it appears the revenue measures aren’t enough to cover the spending called for in the budget bill.

 

In all, the Senate approved an estimated $650 million in higher taxes, which, if correct, would be short of the $750 million in new revenue included in the budget up for Senate approval on Monday. (The Senate won’t meet Sunday; the House will meet to receive the Senate tax bills but is not expected to stay in session long.)

 

It’s also clear that whatever bill package ends up going to the governor’s desk, there will be plenty of work for the next governor.

 

State Sen. President John Alario, R-Westwego, has acknowledged that the budget will inevitably include so many short-term fixes that the governor and state legislators who take office in January will inherit a major budget deficit — as much as $1 billion. One of the uncertainties before the Legislature now is whether the Senate raised enough money Friday and Saturday to fully fund about $750 million in extra spending in its version of the budget to fund the higher education institutions and public health care.

 

Louisiana’s budget woes get national attention
The Pelican State is not alone in confronting a man-made budget crisis. As The New York Times reports, states across the country are grappling with massive budget deficits, even as their states experience an economic rebound after the Great Recession.

 

Many of the legislatures that are struggling with budgets can point to external forces, including slow economic recoveries and rising health care costs, for their woes. “This is very different from past recovery periods, where you had fairly robust revenue growth at the state level,” said Scott D. Pattison, executive director of the National Association of State Budget Officers. “We’re not seeing enough revenue growth to solve some of the problems that we’re seeing.” But many others have their own policy decisions to blame, budget experts say. Longtime bipartisan neglect of pension obligations has caught up with lawmakers in Illinois, New Jersey and Pennsylvania, and deep tax cuts in Republican-dominated states like Kansas, Louisiana and Wisconsin have contributed to budget shortfalls as economic growth has fallen short of projections.

 

Budget woes take their toll on Jindal

With Gov. Bobby Jindal gearing up for a likely presidential run, Tyler Bridges writes in The Washington Post that his political popularity and influence are at a low point in Louisiana.

 

“A lot of people disapprove of his national travel at a time of a budget crisis,” said Bernie Pinsonat, whose firm, Baton Rouge-based Southern Media & Opinion Research, conducted the poll showing Jindal at 32 percent favorability. “There’s been no end in sight to the red ink and headlines over concerns about state cuts to public hospitals and universities,” Pinsonat said. The governor has championed a business-friendly environment in Louisiana, supporting tax breaks for companies, revamping the state’s worker-training programs to better suit the needs of businesses and depleting a $450 million economic-development fund to subsidize new plants and facilities. But his rightward turn ahead of a likely presidential run has also put him in conflict with the business community. Jindal dropped his support of the business-backed Common Core education standards and this year pushed the legislature to abandon them; state lawmakers paid him no heed. With Louisiana facing a projected $1.6 billion budget deficit this year — 20 percent of the state’s general fund — Jindal sought to eliminate $526 million per year of tax refunds given to businesses.

 

Number of the Day

 

$509 million – Amount of money in the latest version of the state budget bill that will need other financing sources in 2016 (Source: Associated Press)