Friday, February 26, 2016

Friday, February 26, 2016

Revenue measures and cuts advance; Downgrading Louisiana; Inventory tax reform bill pulled; and State of the state

Revenue measures and cuts advance

Some lunch-hour dealmaking resulted in the full House advancing bills that raise the state sales tax by a penny and cut spending by $100 million more than Gov. John Bel Edwards has advocated. As The Advocate’s Tyler Bridges and Elizabeth Crisp report, the moves mean that lawmakers are on track of plugging all but $200 million of the state’s $950 million mid-year budget shortfall. But plenty of work remains before lawmakers must adjourn on March 9.


“We’re still short,” Senate President John Alario, R-Westwego, said in an interview. “Making an additional $200 million in cuts would be devastating.”  The measures passed by the House Thursday now go to Senate committees for hearings on Friday. The Revenue & Fiscal Affairs Committee, chaired by state Sen. J.P. Morrell, D-New Orleans, will hear the tax bills while the Finance Committee, chaired by state Sen. Eric LaFleur, D-Ville Platte, will get the spending bills. Both committees are likely to meet over the weekend, as will the full Senate.


The $100 million in cuts included a $44 million hit to public schools. In an earlier version of the bill the money was to be taken from the Minimum Foundation Program formula that funds K-12 schools. But an amendment on the House floor shifted the cut to the state Department of Education – a cause for alarm for advocates of early childhood education:


Officials at the agency said a $44 million cut, combined with previous mid-year reductions, would decimate the agency — 85 percent of available dollars. The $44 million typically goes toward vouchers, the pre-kindergarten program called LA4, pre-K for non-public schools, testing, department staff and other areas. Commissioner of Administration Jay Dardenne said the cut to the Education Department was cause for pause. “I think that’s too substantial of a cut to expect them to realize,” he said. Times-Picayune columnist Bob Mann isn’t happy with the House, which has chosen to cut money for education rather than tackling the tax exemptions and credits that flow to corporations. But he praises House Appropriations Committee Chairman Cameron Henry for his “tacit admission that Louisiana has an enormous revenue problem.”


Speaking of serious, lawmakers could get serious about solving that problem by eliminating corporate welfare and reforming a tax system that rewards the wealthy at the expense of the poor. But such reform is not nearly as satisfying, I suppose, as temporary fixes and cutting the fat from our well-funded public school system.


Downgrading Louisiana

Borrowing money for state construction projects will cost the state a little more after Moody’s announced a downgrade of Louisiana’s credit rating late Thursday. As Rebekah Allen of The Advocate reports, the downgrade is directly related to the state’s budget crisis. Gov. John Bel Edwards quickly weighed in.


“This is a disappointing development, particularly since we believed that Moody’s would wait until the conclusion of the special session to make any decision on our rating,” Edwards said in a statement. “Unfortunately, the downgrade confirms what we’ve been saying about the structural imbalance of our budget. The overuse and abuses of one-time money and fund sweeps by the Jindal administration were a major factor in this decision.”


State Treasurer John Kennedy, meanwhile, told the media that the downgrade is due in part to Edwards “scaring the daylights” out of the credit watchers by threatening the viability of college football and the TOPS scholarship program if money for colleges can’t be found.


Inventory tax reform bill pulled

A state senator has ended his quest to reform Louisiana’s strange inventory tax credit program, which pays businesses a dollar-for-dollar rebate on property taxes they pay on inventories at the local level. Sen. Brett Allain of Franklin pulled his bill Thursday in the Senate Revenue and Fiscal Affairs Committee amid concerns by local governments that it would eat into their tax base. Kevin Litten of Times Picayune reports:


But localities that collect the tax fear that if the state ends the current structure, the Legislature will not follow through on promises to find ways to replace the revenue they receive from inventory taxes. Local government officials, including mayors and sheriffs, all testified against Allain’s bill, leading him to withdraw the bill by the end of Thursday’s Senate Revenue and Fiscal Affairs meeting. Allain said he’ll introduce a new bill on Friday that will create a study committee that will try to find a better way to end the state’s unusual practice of reimbursing businesses for the taxes they pay. He said he worries that if the state doesn’t undertake reform, it will bust the state’s budget even more seriously than what Louisiana is experiencing now.


State of the state

The Center for American Progress has released its 2015 State of the States report, and Louisiana has room for improvement. States (and Washington DC ) are ranked according to how they perform in reducing poverty and inequality, improving the quality of jobs and education, promoting family stability and strength, and ensuring family economic security. Here’s how Louisiana ranked in some of those categories:


  • Reducing Poverty: 49
  • Hunger and Food Insecurity: 49
  • Income Inequality: 47
  • Higher Education Attainment Rate: 48


Number of the Day

85 – Percentage cut to state Department of Education if $44 million midyear cut proposed by the House becomes law (Source: The Advocate)