Senate President John Alario announced this morning that he’s giving up on raising an additional $88 million for next year’s budget by eliminating an outdated tax deduction that flows mainly to the wealthiest households. That means the main task for legislators on the final day of the special session is dividing up an estimated $258 million that’s been raised to date. The Advocate’s Elizabeth Crisp and Tyler Bridges have more:
The governor has said he will have no choice but to make up any shortfall by cutting popular programs on July 1 when the 2016-17 fiscal year begins. When Edwards convened the second special session on June 6 — immediately after the regular session, which followed a 25-day special session in February and March — he called on lawmakers to raise the $600 million to maintain funding for the new fiscal year at the current year’s level. Republicans in the House repeatedly have resisted his call to end individual income and corporate tax breaks, to the frustration of Edwards’ allies. “We haven’t fixed anything,” state Rep. Sam Jones, D-Franklin, said in an interview. “We’re just plugging holes as we’ve been during the past eight years [when Bobby Jindal was governor].”
Melinda Deslatte of the Associated Press has a helpful overview story looks at how legislators plan to divide the revenue they’ve raised:
The Senate Finance Committee prioritized college campuses, health services and corrections programs over K-12 public schools in its reshuffling of the House version of the budget bill. Senators said they were concerned about the threat of cuts to local public school systems, but noted public college systems have taken repeated hits in recent budget years while K-12 education spending grew. … Public school districts would be in line to receive $38 million less in the upcoming budget year, while college campuses would remain at flat financing, under the proposal advanced to the full Senate for consideration. The LSU medical schools, however, would take reductions. Students in the TOPS college program would get only 70 percent of their tuition costs covered, spread evenly over both semesters.
Reminder: The state budget problems aren’t going away as the Legislature departs. More than $1.3 billion in revenue increases approved since 2015 come off the books in 2018. The choice for next year’s Legislature will be whether to renew these taxes and continue to muddle along, or seek structural reforms that raise sufficient, predictable revenue to maintain vital services.
The Jindal budget hangover
Louisiana’s current financial problems were caused in no small part by the reckless practices of former Gov. Bobby Jindal’s administration – which frequently failed to budget for anticipated increases in Medicaid and other programs, leaving yawning mid-year budget gaps. The Advocate’s editorial page looks back at these “fiscal land mines” and says they could still hurt the state in the upcoming budget year.
There might not be enough money to pay for Team Jindal IOUs, and legislators would then face unpalatable choices only months after going home. One of the big bond rating agencies put it this way: “Fitch believes these one-time actions do not address the persistent underfunding of the state’s Medicaid program and other state expenditures, such as higher education tuition system.” Unless a reliable and recurring tax base is generated in the current tax-and-budget session, there could be surprises no one wants to see, and a call for lawmakers to return to the Baton Rouge they are today so ready to leave.
Higher education in the spotlight
Gov. John Bel Edwards and LSU President F. King Alexander will be interviewed on an upcoming episode of the HBO series “Vice” that focuses on Louisiana’s disinvestment in public higher education. Rebekah Allen of the Advocate has the story.
We’ve been disinvesting in higher ed at a very, very rapid rate,” Alexander is seen saying in an interview while walking through LSU’s quad. He said in 2008, the school budget was 70 percent state dollars and 30 percent student tuition, but he said today the model has drastically flipped and state funds account only for about 20 percent of their budget. At the same time, the cost of tuition has increased for students. “Tuition has gone up significantly,” he said. “We’re quietly privatizing public higher education.” Last year, a year of tuition at LSU cost about $7,600 for a full-time student. Tuition has doubled at LSU in the past eight years. The reporter also interviewed Edwards, pointing out that on the campaign trail, he advocated for restoring funds to higher education but is now proposing a budget that includes additional cuts. Edwards stressed that the state is enduring catastrophic revenue shortages and is attempting to fill a $600 million budget gap. “I have a constitutional obligation to deliver a balanced budget, and the cuts have to come from somewhere,” Edwards told the interviewer.
The Urban Institute’s Laurie Goodman reports that in 2015, more than a million households were created while only 620,000 new housing units came online, leaving a shortage of 430,000 units. This gap in supply and demand has meant rising home and rental prices. Goodman predicts a change in the trend is unlikely without a change in public policy.
As builders start work on more new houses, supply will eventually catch up to demand, but the supply-demand gap is expected to continue growing for several years, even if household formation is flat. Chances are it won’t be. Millennials are still forming households, and baby boomers are living longer and more independently than ever. It’s also important to remember that we don’t have a national housing market. In some areas, such as the coasts, housing supply significantly outstrips demand. Many areas are closer to balance, while a stubbornly large number have a long-term surplus—places like Detroit, Cleveland, and Buffalo, where net household formation has slowed or stopped. Moreover, most new construction targets upper-income renters and owners; the lack of affordable stock is already at crisis levels. We need federal, state, and local strategies to boost construction in undersupplied areas, provide better affordability for renters, and extend mortgage credit to would-be first-time buyers.
Number of the Day
$17.5 million – Federal grant dollars that will be awarded in 2016 by the Louisiana Department of Education to local school systems to support the turnaround of their lowest-performing schools. (Source: Louisiana Department of Education)