The Legislature has completed its second full week of work, and no progress has been made on fixing either the $440 million shortfall for the coming fiscal year or the nearly $1.4 billion “fiscal cliff” the state is facing when temporary taxes expire in June of 2018. The inimitable Jim Beam of the American Press lays out the situation:
Legislators are facing four alternatives at their current fiscal session. They can raise taxes, cut spending, eliminate many of the nearly $7 billion in tax breaks they give away every year or a combination of any of those three choices. Why are there no other alternatives? Here is just a hint. The TOPS scholarship program isn’t fully funded for the second year in its proud history. Higher education institutions will lose another $17 million in the next fiscal year on top of the over $700 million they have been cut over the last decade. Failure to reform the budget and tax systems, which seems likely at this point, would mean more of the same.
The centerpiece of Gov. John Bel Edwards’ tax reform package, a proposed Commercial Activity Tax on corporations, appears to be foundering. The Legislative Fiscal Office is still calculating how much revenue could be raised from the tax, while the AP’s Melinda Deslatte reports that the administration is now saying it will take in about half as much revenue as originally forecast. Meanwhile, Nola.com/The Times-Picayune’s Julia O’Donoghue reports that the administration is looking to the Legislature for a new plan, if the CAT is shelved.
The central piece of the governor’s tax overhaul, the commercial activity tax, is expected to die Monday in a Louisiana House Ways and Means Committee meeting. “I’m hearing the same things that you’re hearing about people not embracing it completely,” said Edwards. “But I can tell you, they are not embracing anything else either.”
Still no plan from the House
While tax reform withers, House Republican leaders appear to be more focused on slashing the budget. The Advocate’s Tyler Bridges reports on a draft GOP plan that calls for about $200 million in cuts to state services beyond what Gov. John Bel Edwards has proposed, with some of that money going to TOPS scholarships:
The plan presented privately by Republicans Thursday would fund next year’s budget at 97.4 percent of the current year’s budget as of March 1, with an extra $92 million to fully fund the TOPS scholarships and to provide funding to continue aid for programs that serve medically fragile children.
Nola.com/The Times-Picayune’s Julia O’Donoghue reports on chatter that lawmakers may try to squeeze more money out of the sales tax, which is currently the highest in the country.
The only viable solution appears to be making changes to the sales tax. Lawmakers are most optimistic about expanding the base of the sales tax by applying it to new products and services such as housekeeping, accounting and video streaming accounts such as Netflix. Renewing Louisiana’s highest-in-the-country average sales tax might also be considered as a last resort, said Rep. Lance Harris of Alexandria, head of the House Republican Caucus.
But would that fix the fiscal cliff? According to analysis from the Institute on Taxation and Economic Policy, removing exemptions from the permanent 4-cent state sales tax, in line with the 1-cent temporary “clean penny” sales tax base, would only generate $107 million in annual revenue. Expanding the base to services would raise an additional $216 million. While not fixing the long-term problem, making these sales tax changes would go a long way towards heading off the shortfall for the fiscal year 2018 budget.
Shedding an ignominious title
Advocates for criminal justice reform took to the Capitol on Thursday, making the case that there are more humane and cost-effective policies for responding to crime than locking up more people than any other jurisdiction in the world. The Advocate’s Mark Ballard has that story:
Legislators next week are expected to take up the bulk of the 10-bill package drafted from recommendations by the Louisiana Justice Reinvestment Task Force. The bipartisan effort includes measures that would lower criminal sentences, focus more on diversion rather than prison, and improve rehabilitation programs for convicts. The legislative package would reduce the state’s prison population by an estimated 13 percent over the next decade and that would save about $300 million.
The Advocate’s editorial board supports efforts that will help the state move away from being the “incarceration capital of the world.” The board explains that a lot will hinge on how sentencing for people who’ve committed violent crimes will change.
The larger question should be whether long sentences for all violent crimes are the best approach. Conservative states across the South — even Texas, a state widely regarded by Louisianians as a model of sensible governance — have adopted sentencing guidelines that offer more chances of parole after prisoners have served decades for the worst crimes. Parole is hardly a sure thing, but it should be more of an option if we are going to make a dent in the prison population as it currently exists, and not just in sentencing for new offenses. Both are part of the solution.
White House wants health care vote
President Donald Trump continues to push for a vote on the American Health Care Act- the House bill that would result in 24 million fewer people with health coverage and garners a 17 percent national approval rating. The Century Foundation Senior Fellow Jeanne Lambrew provides a useful refresher on what’s in the bill, including proposed changes that would gut the requirement that insurers don’t discriminate based on pre-existing medical conditions:
According to press reports, the AHCA will be amended to allow states to waive required coverage of essential health benefits and the prohibition on unlimited premiums for people with pre-existing conditions. Depending on how this amendment is drafted, such deregulation could reduce consumer protections for up to 91 million Americans with employer self-insured coverage and result in unaffordable premiums for up to 12 million people enrolled in the individual market. This would run counter to Speaker Ryan’s commitment just before the recess to “making sure that people with preexisting conditions still get the kind of coverage that they need and that’s affordable coverage.”
Two other analyses of note: The Center for American Progress breaks down how premiums would rise for people with various medical conditions under proposed changes to the AHCA; and LBP Senior Policy Analyst Jeanie Donovan looks at implications for Louisiana.
Number of the Day
$1.5 billion – Cost to the state in FY 2019 if the sales tax rate was reduced to 2.03 percent and various exemptions were repealed. (Source: Legislative Fiscal Office analysis of HB 220)