Another credit downgrade

The economic effects of plummeting oil prices and Louisiana’s persistent failure to balance state revenues and expenses prompted another credit downgrade. Fitch Ratings cited Louisiana’s “persistent budgetary imbalance.” The move follows a similar action by Moody’s and will make it more expensive for Louisiana to borrow money for things like state construction projects. The AP’s Melinda Deslatte has details on the blame game that state leaders started playing after news of the downgrade broke:

“This is what happens when you spend more than you take in for seven years running. It’s disappointing but not surprising,” Treasurer John Kennedy said in a statement. “The rating agencies are tired of Louisiana’s accounting gimmicks and spending practices.” …  (Gov. John Bel) Edwards said in a statement that the downgrade “further illustrates the severe budget crisis Gov. (Bobby) Jindal’s administration left us.”… In a special session that ended last month, lawmakers raised more than $1.2 billion in taxes for next year’s budget, but that wasn’t enough to close all the gaps. Republican lawmakers in the House blocked further tax increases sought by Edwards. “We had hoped the special legislative session would have produced the results we needed to avoid another credit downgrade. Unfortunately, some members of the legislature refused to work with me to stabilize our budget,” Edwards said.

Pundits already tired of the 2016 Legislature

The regular session is barely four weeks old, but newspaper columnists already appear to be getting tired of the lack of political will among legislators to deal with Louisiana’s budget challenges. Gambit editor Clancy DuBos focuses his ire on the Task Force on Structural Changes in Budget & Tax Policy, which he says represents unnecessary duplication:

What makes the latest study so unnecessary is the fact that several recent studies have thoroughly analyzed the problems and suggested clear-headed solutions. One, coincidentally, also was commissioned by the Legislature — the Louisiana Tax Study 2015, which was led by LSU’s venerable economist and longtime Revenue Estimating Conference imam Jim Richardson. … Another study was an independent effort sponsored by the Committee of 100 for Economic Development, or C-100. … A third study came from the Washington D.C.-based Tax Foundation, which concluded (to the chagrin of many Republicans, no doubt) that Louisiana actually has one of the lowest tax burdens in the country — ranking us 45th among the 50 states. … Even without benefit of the impending fourth study, [Council for a Better Louisiana] suggested the obvious solution: Simplify the tax code, lower tax rates, make the code more transparent, and thereby create a better (and fairer) tax environment for individuals as well as businesses. It’s simple enough to articulate. Making it happen is quite another matter.

Over at Nola.com/The Times-Picayune, J.R. Ball takes to mocking the conservative legislators who have spent years telling the public that Louisiana’s budget is bloated and that more budget cuts are needed.

It’s show time for budget-cutting Republicans. New taxes, by law, can’t be passed this legislative session and a Senate committee reviewing 400-plus tax credits exempting $7.9 billion in potential revenue this year is going nowhere. In short, conditions are perfect for spending cuts. So, given all of the above, why are so many of our fiscally conservative elected leaders talking about fee hikes — which is another word for “tax” — as the yellow bricked road to a balanced budget? Is it possible that maybe — just maybe — state spending isn’t quite as out of control as state Rep. Cameron Henry and his band of fiscal hawks would have us believe? Other than my waistline, where’s the fat? Find it and cut it. I double-dog dare you.

Lt. Gov. Nungesser looks for a “Reel Deal”

Since it’s inception, Louisiana’s film subsidy program has operated on a simple basis: Socialized risk, privatized profits. But Lt. Gov. Billy Nungesser wants to change that by requiring filmmakers to give Louisiana a share of the profits from productions that are underwritten by its taxpayers. Nungesser called his plan a “Reel Deal” that could guarantee a better return on investment than the state currently gets. Unsurprisingly, the film industry is not amused. New York Times reporter Michael Cieply has the details:

Mr. Nungesser’s proposal is a simple, but radical, one. It appears that none of the approximately three dozen states offering tax credits and other financial incentives to the film industry ask for what even the lowlier Hollywood writers and producers routinely get: some participation in receipts or profit, if only in the form of what old hands call “sucker points.” Those are keyed to net profit, and they are defined by terms so restrictive they are likely to pay only on the most enormous of hits. Louisiana, which spends up to $180 million annually on movie and television incentives, has already witnessed the power of a global blockbuster. Under a program that currently underwrites about 30 percent of qualified expenses on a film, with a number of restrictions and limits, the state paid part of the $150 million or more than it cost to make “Jurassic World.”

What will TOPS look like in 2017?

The uncertainty that remains for Louisiana’s popular higher education tuition assistance program, TOPS, after lawmakers failed to close the budget gaps for the current and upcoming fiscal year is unprecedented according testimony from LOSFA officials on Tuesday. Students at Louisiana colleges and universities now play the waiting game to find out how the remaining deficit will affect their scholarship amounts for the coming academic year. Nola.com/The Times-Picayune’s Julia O’Donoghue explains why the TOPS question is still so hard to answer, and why students could end up waiting months to know how they are affected:

Edwards’ staff has not told financial aid officers, higher education officials or legislators yet how much money they have found for TOPS. But the governor and his staff has warned several times over the past few weeks that it won’t be able to fully fund the program. … As of now, the state has only guaranteed to set aside $60.3 million of the $293.5 million to keep the scholarship fully funded. If no more money was found — which is unlikely — financial aid officers estimate the cutoff score would have to be 28.That 28 cut off score would have caused over 37,000 of the 52,000 students who currently use TOPS to lose their scholarship if it had been implemented this year, according to the state financial aid office. … Edwards and state lawmakers need an additional $233 million to keep TOPS whole, and the state is facing a $750 million in the budget cycle that starts July 1. Given the $750 million shortfall, TOPS is competing with several other state priorities for scarce dollars.

Number of the day

$69 million – Estimated cost of Louisiana’s credit downgrade from the Moody’s credit rating agency earlier this year. The lower rating will increase the required payments the state must make to pay back borrowed funds. (Source: Nola.com/The Times-Picayune)