Still searching for solution to mid-year shortfall

Still searching for solution to mid-year shortfall

Gov. John Bel Edwards and House Republicans remain at loggerheads over how to close the $304 million mid-year shortfall. The lower-chamber GOP leaders want to use less of the state’s Budget Stabilization Fund, while the governor contends that using the maximum allowable allotment will limit the pain of cuts. The AP’s Melinda Deslatte provides insight into the negotiations:

House Republican leaders presented Tuesday what Henry described as a “starting point” for negotiations, suggesting they’d support $53 million in rainy day fund money. That would have cut colleges and agencies Edwards sought to protect. The governor rejected the proposal. House Speaker Taylor Barras, R-New Iberia, is circulating another idea that would cut into protected funds, forcing reductions across nearly all agencies in a broad-based fashion that has raised concerns because it could hit TOPS and K-12 public schools. Other House members are working on scenarios, and Henry said he’ll have a modified proposal Wednesday. “The governor still has not seen a viable alternative,” Edwards spokesman Richard Carbo said in a statement.

A House Appropriations Committee meeting scheduled for Tuesday afternoon was abruptly canceled and rescheduled for Wednesday, suggesting some dissension among the House rank-and-file. Times-Picayune’s Julia O’Donoghue reports:

But Henry and several members of the House Republican caucus aren’t necessarily on the same page about a budget strategy at this point. It’s not clear he has the support of the majority of his party in the House. “I will vote for the rainy day fund if it means that higher education and [hospitals for the poor and uninsured] aren’t cut,” said Rep. Mark Abraham, R-Lake Charles, a member of the House Appropriations Committee.


Medicaid not cause of budget woes

A popular theory making the rounds among conservatives is that growth in the state’s Medicaid budget is to blame for Louisiana’s budget problems. But there’s a lot more to the story than that. In a new blog, LBP breaks down where the growth is happening and why the Medicaid program is critical to supporting low-income families, the elderly and people with disabilities.

In other words, if legislators want to attack the growth in the Medicaid budget it will mean reducing spending on low-income seniors in nursing homes, or cutting off benefits for people with disabilities who are getting care in their communities. Alternatively, they could cut off health care for low-income children and working-age adults who otherwise would have no access to care. And that would be a shame, because the data show that Medicaid is working. Nationally, studies show that having Medicaid coverage improves health and financial security, boosts long-term educational and health outcomes for children and reduces mortality rates. Here in Louisiana, almost 60,000 patients have received health screenings since July 1 because of Medicaid expansion, and more than 4,000 people are being treated for diabetes or hypertension as a result.


Oil prices, fiscal policies and Louisiana’s budget

Louisiana was featured this week in a national report detailing how poor fiscal policies are to blame for the state’s budget woes, not falling oil prices. The report echoes the findings of LSU economist Greg Upton, who wrote extensively about the issue in a white paper for the LSU Center for Energy Studies. The Center on Budget and Policy Priorities’ Elizabeth McNichol and Erica WIlliams lay out the familiar Louisiana story while also detailing the similar situations of other states.

Louisiana made poor, avoidable fiscal policy decisions well before the recent energy bust. In 2007 and 2008, lawmakers repealed income tax increases they had enacted earlier in the decade to offset a sales tax cut that’s still in effect. The revenue impact of rolling back the income tax provisions now sets the state back about $800 million a year. In addition, the state has pursued a wide range of tax incentives and tax breaks for energy companies and other businesses.  The cost of several of these tax breaks has ballooned over time. For example, five tax subsidies- ones for the film industry, business inventory, fracking, solar and wind power, and the state enterprise zone- saw their combined cost rise from about $200 million in 2003 to over $1 billion in 2013. In addition, exempting new horizontal drilling wells from taxes for the first 24 months of operation- a period when the wells are particularly lucrative- cost the state over $1 billion from 2010 to 2014.

In 2016, Louisiana voters did take a positive step by approving the Revenue Stabilization Fund where excess mineral revenues will be deposited in “boom” times. Yet, in order to get back on a sustainable revenue path, fundamental tax reform- that counteracts the short-sighted tax cuts of a decade ago- is sorely needed.


Federal tax uncertainty affecting affordable housing tax credits

Uncertainty over potential changes to the federal tax code is stopping some investors from buying tax credits for affordable housing. Stephanie Riegel of the Greater Baton Rouge Business Report points out that this is holding up some affordable housing developments.

“Some projects can absorb it and some aren’t able to fill that gap,” Cunningham says. “These are projects that were in the pipeline and the value of those credits has dropped…so we have problems with these deals coming to completion.” One example is that East Baton Rouge Housing Authority’s River South multifamily complex, a mixed-income project of 46 affordable housing and market rate units off Nicholson Drive, across from the Water Campus. The agency was planning to use LIHT credits to finance the project but has since been pursuing other options.


Number of the Day

$69 million – Amount of additional budget cuts proposed by House Republicans above the levels proposed by Gov. John Bel Edwards. The cuts would hit higher education, K-12 schools, prisons, and health care services. Gov. Edwards rejected the plan. (Source: The Advocate)