Nov. 11: The governor talks tax reform

Nov. 11: The governor talks tax reform

The goal of Louisiana’s upcoming tax reform effort should be to raise enough money to start reinvesting in education, public safety and other priorities that have been neglected amid years of budget shortfalls.

The goal of Louisiana’s upcoming tax reform effort should be to raise enough money to start reinvesting in education, public safety and other priorities that have been neglected amid years of budget shortfalls. So said Gov. John Bel Edwards, who sat down with Jeremy Alford for a revealing hourlong discussion that also touched on elk hunting, the August floods and his relationships with other state officials.

Edwards said the recent recommendations from a blue-ribbon task force are similar to the plans he put forward earlier this year that the Legislature rejected in favor of temporary patches. Edwards told Alford he remains optimistic that lawmakers will come together around a reform package next year, and indicated that the big question is whether a reform package will be “revenue neutral” or would raise more money than Louisiana currently collects.

“A revenue neutral starting point … wouldn’t be such a bad thing,” Edwards said, arguing that the changes he supports, such as broadening the state sales tax base and raising more money through income tax, would lead to better long-term revenue growth than the status quo. But Edwards said he “would like us to do better than revenue neutral.

“If you start at revenue neutral,  you start out agreeing that you’re going to fund TOPS at 70 percent,” Edwards said. “That’s not what I hear people in Louisiana saying they want.”  It also would not allow for increases to public schools that have seen their funding flatlined in recent years, among other priorities. Other snippets from the podcast:

  • Edwards said the upcoming mid-year budget cuts, resulting from a $315 million deficit in the prior fiscal year, are going to be “really nasty.”
  • There have been informal discussions about a special legislative session in 2017, but the prospects of one are unlikely.
  • Edwards said legislators who are looking for additional budget cuts should remember that $550 million in cuts were made during the three legislative sessions in 2016.

The whole podcast is worth a listen. The budget and tax discussion begins around the 37th minute.


Louisiana’s recession

The Legislature’s chief economist, Greg Albrecht, told the state’s revenue forecasting panel that Louisiana’s weak employment forecast is the underlying reason behind sluggish tax collections. Albrecht told the Revenue Estimating Conference that Louisiana remains in a recession, yet businesses continue to benefit from generous tax breaks. The AP’s star reporter, Melinda Deslatte, was there:

Louisiana’s unemployment rate is 6.4 percent, third-worst among states. The number of people working in the mining sector, which includes the oil and gas industry, has fallen 30 percent since December 2014, according to Albrecht’s data. … “What we need is employment growth to stop declining. It boils down to that,” Albrecht said. “Recovery for us is being pushed back. It doesn’t look like we’re going to even start to see anything until we’re well into 2017 sometime.” …  Albrecht said the amount of tax breaks paid to businesses continues to soar, despite legislative efforts to scale back the tax break spending. He said the increase could be a combination of companies rushing to claim available tax breaks or being able to write off the larger losses that they are seeing in the state’s struggling economy.


What’s next for higher education

The financial future of Louisiana’s public colleges and universities is in flux after the failure of a ballot measure that would have allowed university boards to raise tuition on students without legislative approval. The voters’ 57-42 rejection of Amendment 2 should send a signal to lawmakers that it’s time for them to reinvest in higher education, instead of sloughing off more of the cost to students and their families. Times Picayune’s Danielle Dreilinger reports:

The Louisiana Budget Project had opposed the amendment because “the incentives would have aligned in favor of higher tuition,” director Jan Moller said. He hoped the non-passage would renew pressure on lawmakers to find funding for higher education. But (Sen. Conrad) Appel (of Metairie) had bad news for him and people who care about college quality. The state’s higher education system is still broke, and he doesn’t know the Legislature is going to do now.

The Advocate’s Rebekah Allen reports that the state’s higher ed chief believes rejection of the amendment is a mandate for the Legislature to provide funds to schools.

After the public rejected the amendment Tuesday, Louisiana Higher Education Commissioner Joe Rallo said he respects the will of voters and understands their concerns about potential tuition increases. But he also noted that the state is facing another midyear budget cut of more than $300 million, which could translate into yet another reduction in funding for colleges and universities. Rallo said he interpreted the rejection of the amendment as a mandate for the Legislature to reinvest in higher education. “If they voted ‘no’ to allowing institutions to raise tuition, they were also saying they expect the Legislature to fund public education,” he said.


States pass taxes for key investments

Raising revenue for important investments was a winner at the ballot box in two states. Voters in California and Maine approved taxes on the wealthy in order to fund education and health care. Forbes’ Ashlea Ebeling has the story:

The California vote was against a backdrop of temporary tax hikes already in place. California voters, with Proposition 30, approved in November 2012 and made retroactive to January 1 of that year, raised income taxes on $250,000-plus earners through 2018. Proposition 55 extends those tax hikes (with the top 13.3% rate for $1 million-plus earners) for another 12 years, through 2030. Otherwise, the top rate would have fallen back to 10.3%. The increased state revenue projections range from $4 billion to $9 billion each year from 2019 through 2030, with the money earmarked for education and healthcare.


Number of the Day

42 – Percent decrease in uninsured nonelderly veterans after implementation of the Affordable Care Act, with most gains occurring in states that expanded Medicaid. (Source: The Urban Institute)