March 29, 2016

March 29, 2016

Legislators question budget ‘magic’; Another commission looks at state tax structure; Early childhood programs face potential cuts; Don’t take my money, if I ever have any

Legislators question budget ‘magic’

When the Legislature failed to re-balance the current-year budget during the special session, officials warned that damaging cuts would be coming to state services. But when Gov. John Bel Edwards announced that Medicaid would be absorbing the $70 million gap through cuts and “efficiencies,” legislators began wondering why they weren’t told sooner about such solutions. As Nola.com/The Times-Picayune’s Kevin Litten reports, some of the gap will be filled by delaying payments to private, safety-net hospitals until next year to take advantage of more favorable federal financing.

 

If the payments the state would make to the safety-net hospitals are made before the end of the fiscal year, the federal government would pay 62 percent of the cost. If they’re made after Medicaid expansion occurs, the federal government will pay 100 percent of the costs. It’s an arrangement that only works because the Centers for Medicare and Medicaid Services allows such flexibility, and because a large hospital like University Medical Center is agreeing to take the payment later rather than sooner.

Litten’s colleague, Julia O’Donoghue, says the administration’s ability to come up with last-minute efficiencies instead of cuts plays into a Republican narrative that the state’s budget problems aren’t as bad as advertised. Others reiterate the amount of cuts needed to fill last year’s budget deficit and next year’s cannot come solely from cuts.

 

“It doesn’t give me great hope that we can cut the budget in the Department of Health and Hospitals [next year],” said Sen. Sharon Hewitt, R-Slidell. It’s also made some of the more conservative members of the Republican-controlled Legislature question whether next year’s budget shortfall — estimated to be about $750 million — is really as dire as the Edwards administration has said. “You use the media to tell everyone the sky is falling, and then everything works out in better shape than was anticipated,” said Rep. Cameron Henry, R-Metairie, the head of the Appropriations Committee that oversees the budget. … But Edwards and longtime legislators say it [is] unrealistic to think that $750 million worth of “savings and efficiencies” can be found in the rest [of] state government for next year, especially after seven consecutive years of budget cuts.

 

Another commission looks at state tax structure

A new independent study group will take a fresh look at Louisiana’s tax and budget structure after reform ideas were abandoned by the Legislature during the recent special session in favor of short-term budget balancing. Created by Rep. John Schroder of Covington, the Task Force on Structural Changes in Budget and Tax Policy will make recommendations to the governor and Legislature by Sept. 1. Without changes, the budget shortfall in five years is predicted to grow to $2.5 billion. The group faces an uphill battle though, since state leaders differ in what an appropriate fix will look like. Elizabeth Crisp of The Advocate has more:

 

“We’re not going to fix this raising revenue,” [Rep. Schroder] said. “I don’t believe there’s a temperament in the state of Louisiana, from the majority, to raise taxes.” But still some see the taxing side as an important element to consider. Louisiana gives away billions in tax credits and exemptions every year — money that gets skimmed off the top of the budget before a dime is spent on government services. Several have called for a deeper evaluation of those, though many agree that it’s a tough sell. “We talk about tax breaks all the time, but once you get one on the books, it stays there forever — or it seems that way,” LSU economist Jim Richardson said…Some have suggested eliminating all tax breaks and then adding them back individually if they can be justified. Others feel the best plan is to strip them away one by one upon evaluation. Added to the mix is the army of lobbyists ready to wage battle for their clients’ interests.

 

Early childhood programs face potential cuts

After staving off budget cuts during the special session, early childhood education programs may face the chopping block once again as Louisiana legislators look for ways to plug a $750 million shortfall in next year’s budget. More than 5,000 low-income students could lose access to private child care centers and funding for preschool if two programs are cut. Vulnerability is attributed to the location of funding for these programs within the “subgrantee assistance” portion of the Department of Education’s (DOE) budget. Will Sentell from the Advocate has more

 

[Executive Director of the Policy Institute for Children in New Orleans, Melanie] Bronfin said the programs face renewed threats in the regular session, in part because the dollars are tucked away in a little-noticed part of the agency [DOE] called “subgrantee assistance”…[she] said about $7 million is at risk for a program that aids around 1,500 low-income children in state-approved private preschools and child care centers. Current funding is $4,580 per child. In a second area, Bronfin said nearly $9 million that finances classes for about 2,300 children is in peril because of proposed legislation to end dedicated funds. Bronfin said another $7 million in aid for the LA4 program would trim those ranks by 1,528 seats. Just over 16,0000 students from disadvantaged families are enrolled now.

 

Don’t take my money, if I ever have any

The federal estate tax is one of the most effective tools available to combat income inequality, and surveys consistently show that a majority of Americans are concerned about wealth disparities and favor higher taxes on the wealthy. But as The New York Times’ Bryce Covert explains, the inheritance tax is different. Polls show majority support for reducing or eliminating it, even though the vast majority of estates don’t pay the tax.  In its current form, the estate tax is 40 percent on anything above $5,340,000, a far cry from its height of 77 percent on anything above $40,000 in 1941. Despite the generally populist tone of the presidential campaign, the candidates aren’t exactly promising to tax the heirs of the ultra-rich:

 

It may not be surprising that all three Republicans still in the presidential race have promised to abolish the estate tax. It’s become mainstream posturing. Mitt Romney pledged to do the same in his presidential campaign, and the last Republican president actually succeeded in getting rid of it for a time, as the Bush tax cuts phased it out in 2010 before it was phased back in shortly thereafter. More surprising is the feeble treatment the tax gets on the other side of the aisle. Bernie Sanders, whose campaign has harnessed rage at the concentration of money in the hands of the few and has made sweeping policy promises, pledges on his website to “create a progressive estate tax.” But he would bring the tax only back to where it was in 2009, right before it was phased out altogether and far from where it was before President Bush got his hands on it. Hillary Clinton has proposed doing the exact same thing. No candidate would take the tax back to where it was when it had a real impact on wealth concentration. And voters certainly aren’t demanding that they do.

 

Number of the day:

$2.5 billion –  Louisiana’s projected budget shortfall in five years, if current taxes are allowed to expire as scheduled.  (Source: The Advocate)