Budget instability leads to credit downgrade

Budget instability leads to credit downgrade

Citing several major red flags in the state’s financial situation, Standard and Poor’s downgraded Louisiana’s credit rating from AA to AA- on Wednesday.

Citing several major red flags in the state’s financial situation, Standard and Poor’s downgraded Louisiana’s credit rating from AA to AA- on Wednesday.  Gov. John Bel Edwards pointed to the downgrade as proof that the Legislature must enact structural tax and budget reform in the upcoming legislative session. The action by S&P is the third credit rating downgrade for Louisiana since last April and likely will trigger higher interest rates for the state. Elizabeth Crisp of The Advocate reports:

In its downgrade report, S&P cited “the state’s persistently weak revenue collections stemming from prolonged contraction in the oil and gas industry coupled with weak income tax collections (both individual and corporate).”  Moody’s, in its negative outlook explanation, cited “continuing risks regarding a fiscal cliff looming in fiscal 2019 as tax increases roll off, uncertain revenue forecasts, implementation challenges and legislative reluctance to enact significant changes to the state’s revenue structure” in its explanation for the negative outlook. State lawmakers last year approved a temporary sales tax hike to shore up the budget, with plans to conduct a more in-depth structural reform this year.

LBP Director Jan Moller said the news provides additional proof of the need for comprehensive tax reform:

[Moller] said that the state’s third downgrade should convince legislators to consider personal income tax when it reviews the budget. … “It’s something that has to be on the table when they sit down to look at the tax code,” Moller said. “Everybody who has looked at this issue understands you have to look at the income tax as part of a reform solution.”

LBP’s full set of recommendations for tax reform can be found at www.investlouisiana.org.


CBO: Obamacare not in a “death spiral”

Contrary to claims by House Speaker Paul Ryan and President Donald Trump, the federal Affordable Care Act (a.k.a Obamacare) is not imploding. Quite the opposite, according to the nonpartisan Congressional Budget Office’s (CBO) analysis of the American Health Care Act (AHCA). In fact, while the CBO estimated that the GOP replacement bill would create an additional 24 million uninsured Americans by 2026, it also showed that the existing law would lead to stable markets and reduced premiums if left in place. Vox’s Matthew Yglesias:

The CBO’s message is, essentially, that if Trump simply sticks with the status quo, the wave of huge premium hikes and insurer dropouts will end. Since his administration will undoubtedly have tinkered with the relevant regulations in the interim, Trump will then be able to claim that he “fixed” Obamacare — arguably even made it Great Again — with those administrative moves. Over time, Republicans could make various modifications to the law — and even find bipartisan support for some of them. But the notion of “implosion” has given the campaign for a massive rewrite a sense of urgency that, according to the CBO, is basically unwarranted.


Gas tax proposals taking shape

Secretary of Transportation Shawn Wilson said on Monday that Gov. John Bel Edwards will be looking for legislators to take the lead in the upcoming legislative session on proposals to raise revenue for much-needed transportation infrastructure investments. According to the Department of Transportation and Development, the state has a backlog of transportation projects to the tune of $29 billion. Baton Rouge lawmaker Rep. Steve Carter told the The Advocate’s Will Sentell that he is working on legislation that would increase the tax on gasoline by up to 17 cents per gallon:

The proposal, even though it is still being crafted, marks the first time that a state lawmaker has attached his name to a specific gasoline tax increase. Each penny hike in the state’s gasoline tax raises about $30 million per year. “It is probably going to be 15, 16, 17 (cents),” Carter said. He said he especially wants road and bridge relief for the Baton Rouge area, which Gov. John Bel Edwards has said is in dire need of relief.

Sentell reports that Rep. Sam Jones of Franklin is considering filing a similar proposal, but one that would include a smaller tax increase and have to approved by voters before taking effect.


The skinny on Trump’s “skinny budget”

The “skinny budget” President Donald Trump released this morning would harm the people he pledged would be his top priority: low- and middle-income families that have struggled with stagnant or declining incomes, according to a new report by Sharron Parrott, David Reich, and Isaac Shapiro of the Center on Budget and Policy Priorities. A $54 billion cut to non-defense discretionary spending would result in deep cuts to vital safety net programs – including housing assistance, child care subsidies, and even the Meals on Wheels program that provides food assistance low-income seniors.  In states and cities with high poverty rates and slow economic growth, the impact of the president’s budget will be particularly damaging. Richard Rainey of the Nola.com/The Times-Picayune reports on the potential impacts of the president’s budget in New Orleans and across the state:

“It isn’t just ‘New Orleans is going to take a cut and Mayor Landrieu is upset about it,'” said Zach Butterworth, Landrieu’s executive counsel and congressional liaison. “We are ringing a bell for the state right now. … For New Orleans, Trump’s proposal could push for an abrupt halt to decades of spending on programs that encourage affordable housing, shelter the homeless, fight blight and support senior centers and the city’s recreation department, officials warned. Despite Trump’s posturing during the campaign as a “law and order” candidate, possible cuts could also upend community policing measures, district attorneys’ abilities to prosecute rape and domestic violence cases, and other public safety initiatives in a poor and violent city.


Number of the Day

$30 million – Amount of revenue generated annually by each one-cent increase in the state gas tax. (Source: Final Report of the Governor’s Task Force on Transportation Infrastructure Investment)