Dec. 14: Revenue Estimating Conference punts

Dec. 14: Revenue Estimating Conference punts

Louisianans will have to wait at least another month to learn the true depths of the state’s mid-year budget shortfall after a revenue forecasting body deadlocked on Tuesday.

Louisianans will have to wait at least another month to learn the true depths of the state’s mid-year budget shortfall after a revenue forecasting body deadlocked on Tuesday. While economists from the Legislature and the administration agreed the state faces a significant gap between spending and revenue in the current fiscal year, their models aren’t in sync. The Advocate’s Elizabeth Crisp has more:

 

The state’s economists put the mid-year deficit at somewhere between $464 million and $257 million in their briefing Tuesday. The state already is faced with carving out $313 million from the current budget to make up for a shortfall from last year’s budget. The latest shortfall news didn’t come as a surprise Tuesday, as (Commissioner of Administration Jay) Dardenne has repeatedly warned of a looming deficit he estimated at $300 million. But LSU economist Jim Richardson, also a member of the REC, said that he thinks the picture should be clearer in January. Richardson and House Speaker Taylor Barras, R-New Iberia, favored waiting a month before altering the state’s budget outlook to reflect the deficit. Dardenne and Senate President John Alario, R-Westwego, had pushed for immediate action. REC votes must be unanimous so no action was taken.

The AP’s Melinda Deslatte reports that Dardenne was unhappy with the delay, as he felt it would leave agencies with less time to cope with the large cuts on the way. He and Senate President John Alario sought immediate revisions to the revenue forecast.

 

Gov. John Bel Edwards’ chief budget adviser Jay Dardenne called Tuesday’s postponement by the Revenue Estimating Conference irresponsible. He said it ignores the inevitable need for millions of dollars in cuts and gives agencies less time in the budget year to cope with them. “There’s no question we’re going to have to make cuts. The longer we wait, the worse it’s going to get,” said Dardenne, the Democratic governor’s commissioner of administration. He added: “What we’re doing today is just turning a blind eye to reality.”

Gannett’s Greg Hilburn talked to Gov. Edwards about the decision.

 

“Each day and month that goes by in the fiscal year makes the cuts that we’re going to have to make on departments and agencies harder to manage,” Edwards said. “But we’ll make it work.” All agreed any hope for a revenue rescue is unlikely. “Cuts are coming,” said Senate President John Alario, R-Westwego. “There’s no way to avoid it.”

Transportation funding recommendations go to governor

A task force charged with advising Gov. John Bel Edwards on ways to make inroads on the $13 billion transportation infrastructure backlog officially recommended $700 million more in funding to rebuild the state’s crumbling roads and bridges. They left the details up to the governor, though they did recommend that any new revenue generated for transportation infrastructure include automatic increases based on inflation, according to The Advocate’s Will Sentell:

 

Part of the plan approved by the task force includes a recommendation that any new tax revenue be linked to the rate of inflation or other expenses — indexing. The current 16 cent state tax would be 37 cents today if it had been linked to the cost of living in 1984. The panel also recommended increases in special permit and registration fees for commercial trucks, and putting that revenue into a bond issue to improve bridges statewide. However, those sources of revenue generate modest amounts of money — $25 million and $60 million respectively. Each penny of the state gas tax raises $30 million, which means a roughly 23 cent hike would be needed to raise $700 million yearly.

Sam Karlin of the Greater Baton Rouge Business Report notes that some task force members fear that raising the gas tax will be overshadowed by the broader tax reform debate to get the state out of revenue crisis mode.

 

But the moves toward solving the state’s transportation issues—heavy traffic congestion, a lack of bridges and torn-up highways, among other things—come at a critical time for other state budget issues. A host of tax increases passed this year will end in 2018, creating a massive fiscal cliff the state is approaching. Given that the Legislature can only take up taxes in odd-numbered years, the pressure is on in 2017 for lawmakers to reform the state’s tax code. State Rep. Kenny Havard, R-Jackson, is worried the issue of transportation spending will get lumped into a broader fight over whether the state needs to raise more taxes.

Folly of ACA “repeal before replace”

The current health care system is far from perfect and there are a number of bipartisan ways Congress could work to build on the coverage gains from the Affordable Care Act. Repealing the major parts of the ACA before working out a replacement, however, is a fool’s errand. That’s the opinion of policy experts from the Brookings Institution. They contend that “repeal before replace” would throw the non-employer based health care market into chaos and make reform all the more difficult. Alice M. Rivlin, Loren Adler, and Stuart M Butler explain:

 

The current situation presents an opportunity to replace the Affordable Care Act with a more sustainable bipartisan law. But repeal must wait until a consensus is built around a replacement plan. Not doing so – starting with repeal and delay – threatens to destabilize the individual market and harm not only those who receive subsidies from the ACA, but also everyone who now purchases insurance in the individual market. Estimates show that premiums would jump at least 20 percent and cause 4.3 million to lose health insurance as soon as next year, and that’s nothing compared to the damage that would (be) inflicted if a replacement plan subsequently failed to emerge. The current version of repeal through reconciliation, leaving in place the ACA’s insurance market reforms, would nearly destroy the individual market if its provisions took effect, causing 30 million people in total to lose health insurance, leaving more uninsured than before the ACA. Fixing the ACA is important, but replacing it with a durable plan to make health coverage broadly affordable will take time and constructive bipartisan collaboration.

Vox’s Sarah Kliff talked with Donald Trump voters in Kentucky who received health insurance through the state’s “Kynect” marketplace. They wanted expanded coverage that was more affordable, not repeal of the law.

 

There was a persistent belief that Trump would fix these problems and make Obamacare work better. I kept hearing informed voters, who had watched the election closely, say they did hear the promise of repeal but simply felt Trump couldn’t repeal a law that had done so much good for them. In fact, some of the people I talked to hope that one of the more divisive pieces of the law — Medicaid expansion — might become even more robust, offering more of the working poor a chance at the same coverage the very poor receive.

Loyola University New Orleans’ Jesuit Social Research Institute has an action alert calling on Louisiana’s Senators to oppose an ACA repeal bill that doesn’t include an immediate, adequate replacement.

 

High return on investment for early care and education

Nobel laureate James Heckman is out with new research showing the importance of high-quality early care and education for children from birth to age five. He shows a 13 percent rate of return on every dollar spent. Louisiana currently spends zero general fund dollars on early care and education for children 0-3. The Washington Post’s Emma Brown has the story on Heckman’s research:

 

Now Heckman has released new research showing that the return on investment is even higher for high-quality programs that care for low-income children from infancy to age 5. Children in such zero-to-five programs are more likely to graduate from high school, less likely to be incarcerated than their counterparts who stayed home or enrolled in low-quality programs, had higher IQs and were healthier during the course of their lives, according to the study released Monday. All of that taken together leads to a significant savings to society, the study found. The rate of return on the public investment in zero-to-five programs is 13 percent per year, Heckman and his colleagues estimate, up from an estimate of 7 percent to 10 percent per year for preschool programs that start at age 3. The more comprehensive zero-to-five programs cost about $18,500 per year for each child enrolled — more than the average public school district spends per pupil in grades K through 12. But for every dollar invested, the program generated a societal benefit of $6.30, according to Heckman.

 

Number of the Day

4.3 million – Number of Americans who will immediately lose health insurance under an ACA repeal bill, even if repeal is delayed. That number would grow to 30 million if Congress doesn’t agree on a replacement. (Source: The Urban Institute)