Friday, March 4, 2016

Friday, March 4, 2016

Two steps forward, one step back; Sunset for all tax credits; Financial Emergency Pilot; and “A bridge to nowhere”

Two steps forward, one step back

After a week of stalling and backroom conversations, the Legislature made significant progress Thursday on whittling down the $900 million gap in the current-year budget. The House-Senate stalemate was broken when the Senate Finance Committee re-worked a budget-cut bill authored by the House by removing some of the most onerous reductions. The House then signed off on a 22-cent hike in the cigarette tax. Along with other maneuvering, that brought the mid-year gap down to $67 million with five days left in the special session. As The Advocate’s Tyler Bridges reports,

 

The current $67 million shortfall means that lawmakers appear to have come up with at least $835 million towards the $900 million gap they are facing this year. That $835 million includes spending cuts and tax increases, but easily more than half would come from one-time fixes, which everyone seems to decry in theory. That one-time money includes $328 million from the rainy day fund and a settlement with BP, $75 million from having retailers advance their sales tax payments and $80 million announced Thursday from refinancing bonds. None of that money would be available next year. The first step toward ending the stalemate between the House and the Senate on Thursday came when the Finance Committee approved House Bill 122, but only after adding back $69 million worth of cuts in the version approved last week by the House. Senators called the House cuts a “sham” because they would have virtually shut down the state Department of Education, including its ability to fund the voucher program for poor children and the state’s role in administering college board tests.

 

But the good news was tempered by late word from Gov. John Bel Edwards’ administration that a bill that was slated to raise $75 million this year will not actually raise that amount in time to help with the current-year deficit. Gannett’s Greg Hilburn:

 

That leaves a $142 million hole lawmakers must fill before this special legislative session to address the budget crisis ends by law Wednesday. “You bet I was alarmed,” said state Rep. Jack McFarland, R-Winnfield, who said he was one of the legislators called late Thursday night. “I left yesterday thinking we were $67 million short and then find we’re more than $140 million short. I’m not sure what to say.” Noble Ellington, Edwards legislative director, confirmed the ruling. When asked what the plan is to address the ballooning deficit, he said, “We don’t have an answer yet.”

 

Unless legislators agree to fill the remaining gap with tax revenue, Louisiana’s hospitals could be in big trouble – especially the nine private hospitals that have contracted with the state to provide charity care for the poor and uninsured. Julie O’Donoghue of Nola.com:

 

The private hospitals who took over the old charity functions have already indicated they might walk away from their deals with the state if they have to take on more budget cuts. If that happened, poor people would have access to health care disrupted and the state would be forced to take over hospitals it privatized just two years ago. Several of the state’s health-related higher education programs — occupational therapy, physical therapy, nursing and similar degrees — would be eliminated as well.

 

Sunset for all tax credits

An amendment by J.P. Morrell of New Orleans tacked onto to a bill in Senate Finance Thursday sunsets all tax credits next year. If the measure passes, entities that benefit from the credit will have to defend its merit to the legislature in order to have the sunset removed. The film industry, oil and gas, big business and small nonprofits could all feel a negative impact on their bottom line. Kevin Litten of the Times Picayune has more on why it’s important to evaluate all credits – even ones that go to good causes.

 

Jan Moller, the director of the Louisiana Budget Project, said there’s been plenty of talk about putting sunsets on tax credits in the past. He called having a conversation about tax credits’ value “a good thing.” “We’ve recommended in the past that tax exemptions and credits should sunset, but that does not mean by any means that we think all should go away,” Moller said. ” I think a periodic review is a good thing so that everyone is aware of the cost-benefit.”

“If this makes it into law, I think you’re going to see a flurry of activity from people who want to keep their credits,” Moller added…Overhauling Louisiana’s tax credits was also a major issue during last year’s gubernatorial debate. All four of the candidates at one time or another said they’d give tax credits a hard look; Gov. John Bel Edwards has been particularly vocal about getting the state’s finances in order, including reviewing tax credits. now, if Morrell’s amendment survives, Edwards and legislators will get their chance.

 

Financial Emergency Pilot

Congress has the opportunity to fund a pilot program available to states and localities who want to try innovative ways to help families who are one paycheck away from a financial emergency, In January, the Obama administration proposed a $2 billion, five-year initiative of Emergency Aid and Service Connection Grants. Blogger J. Michael Collins of The Hill has details.

 

What kinds of innovations are possible? Low-cost, low balance savings accounts with automated deposits from paychecks are one idea—like a 401(k) to smooth short-term income and expenses. Other ideas tie savings to housing payments or tax refunds. New forms of micro-insurance might allow people to buy coverage to cover an emergency car repair or other standardized expense. But without regulatory waivers and pilot funding, policymakers will not know if these ideas will prevent economic hardships and reduce reliance on chronic public assistance.  This is where a federal pilot for research and development can make a powerful impact. Regardless of political ideology, federal, state and local public officials all benefit from better evidence on ways to prevent homelessness, hunger and other harm to families and children. Families today face more income and expense volatility. Congress should provide the funding and flexibility needed to test innovative, community-based solutions to help these families avoid poverty – and maybe even escape from it.

 

“A bridge to nowhere”
The Advocate’s editorial board is not happy about the Senate’s decision to put a five-year sunset date on the new one-penny sales tax that’s nearing final passage. By pushing the expiration date past the next election, the newspaper worries that it will reduce the impetus for reform and leave a regressive tax in place longer than necessary.

 

We’ve generally been skeptical of sales taxes because they’re regressive, tending to affect taxpayers who can least afford them. This new proposal lacks the hundreds of exemptions and exclusions under current law, falling heavily on the working families of the state. It also would, if approved by legislators and signed into law, give Louisiana the highest retail sales tax in the nation. All of which underscores the importance of making this tax temporary. Ultimately, Louisiana needs a better way to raise revenue. In answer to that reality, Edwards and his legislative allies are labeling the new sales tax an “emergency measure.”

 

Number of the Day

$142 million – the remaining budget shortfall lawmakers must fill before the end of special legislative session Wednesday. (Source – The News Star)