What’s the price of tax reform?

What’s the price of tax reform?

For almost two years now, one key question has overhung the debate over Louisiana’s structural budget shortfall: What will it take for House Republicans to support a package of permanent, sustainable revenue measures to replace the temporary, 1-cent sales tax enacted in 2016?

Number of the Day

70,953 - Total state employees at the end of the 2016-17 fiscal year, down from 100,486 in FY2009 (Source: Popular Annual Financial Report/Division of Administration)

For almost two years now, one key question has overhung the debate over Louisiana’s structural budget shortfall: What will it take for House Republicans to support a package of permanent, sustainable revenue measures to replace the temporary, 1-cent sales tax enacted in 2016? The topic has been studied and studied and studied some more. Deadlines have come and gone; plans have been promised and not delivered. But as Gov. John Bel Edwards prepares to unveil a bleak executive budget, details are starting to emerge about what Republicans want to see in exchange for a tax vote. The AP’s Melinda Deslatte, as usual, has the scoop:

House Speaker Taylor Barras said he’s floated four “budget reform” ideas to the Democratic governor that GOP lawmakers want in any Edwards agenda for a possible February special session on taxes. Included in the proposals are tighter limits on annual state spending growth and creation of a more transparent system for viewing agency spending. In the Medicaid program, Barras said lawmakers want to charge some patients a copay for health services and prescription drugs and to enact work requirements on certain enrollees in the program.

It’s still unclear what revenue proposals, if any, House leaders are willing to support if Edwards agrees to the so-called reform measures. As Deslatte points out, the idea of charging copays for Medicaid services was rejected by the Legislature in 2016, and a work requirement bill died last year amid opposition from Edwards (though he’s signaled a willingness to support an alternate version this year). But the price of doing nothing – or punting the issue to June, when legislators will have fewer options at their disposal, comes with serious risks. The Advocate’s Mark Ballard notes that the state’s creditors are paying close attention to the Legislature’s dysfunction.

Meanwhile, the cost of loans to the state may be going up as the big Wall Street rating agencies are hinting broadly that Louisiana’s credit rating is about to go down because of government’s failure to get its fiscal house in order.

 

The ‘doomsday’ budget

By the time some of you read this, Gov. John Bel Edwards will have presented his 2018-19 executive budget to the Legislature. By law, the proposal must account for the loss of more than $1 billion due to expiring taxes. And since the money must be taken from the $3.5 billion in “discretionary” general fund dollars the state has available, it means health care and higher education will bear the brunt, as usual. The Advocate’s Elizabeth Crisp:

“There’s not a single cut that we will propose that we want to implement,” Edwards, a Democrat, told The Advocate editorial board on Friday. “We don’t want those cuts made.” Near elimination of the popular Taylor Opportunity Program for Students college scholarships, defunding safety net hospitals and layoffs are among some of the most drastic measures that Edwards will reveal. “It’s stark,” he said.

Nola.com/The Times-Picayune’s Julia O’Donoghue dives into what the cuts may mean for health care services – particularly the nine safety-net hospitals that get enhanced payments from the state to care for indigent patients and provide medical education.

(Louisiana Hospital Association spokesman Mike) Thompson said a dramatic reduction in funding for those hospitals would also have a ripple effect and take a toll on other hospitals in an area like New Orleans. If these hospitals were to close or drastically reduce services, other hospitals in the state would be forced to take more patients that might not be able to pay their bills — and those hospitals wouldn’t be receiving additional funding to cover those costs.

Caveat: There is no one in either party who expects this budget to pass into law. But the threat of significant cuts, and a credit rating downgrade that would make it more expensive to repair roads and other infrastructure, is very real unless legislators do the responsible thing and replace the revenue that’s due to expire.

 

Inside the federal shutdown

Social Security checks will still go out and mail is still being delivered. But soldiers are not getting paid and 90 percent of the U.S. Department of Education has been sent home. National parks will stay open, but don’t expect the bathrooms to be clean or the trash to be emptied. Such is life under a federal government “shutdown,” which began at midnight Friday after Congress could not agree on a budget deal. Negotiations continued throughout the weekend, and the Senate is scheduled to vote Monday morning on a deal that could potentially end the standoff. Mark Landler of The New York Times on what this all means:

Experts on the government said the sense of confusion and dislocation was being amplified by the Trump administration’s slowness to advise staff agencies, the unusually high rate of turnover in federal ranks, and the lack of planning for a shutdown that few in the White House expected to happen.

The Senate is scheduled to vote Monday on a deal to reopen the government through Feb. 8. But as Axios reports, that still leaves the Children’s Health Insurance Program (CHIP) and the fate of 800,000 people who were brought to America as children in limbo.

 

Medicaid work requirements don’t work (cont…)

Gov. John Bel Edwards’ decision to call for unspecified work requirements for some Medicaid recipients took Louisiana conservatives by surprise. The AP’s Melinda Deslatte reports that state Sen. Sharon Hewitt wants the governor to support legislation she sponsored in 2017, which failed to get out of a Senate committee amid opposition from the administration. But whatever Edwards proposes is likely to differ substantially in the details.

Details of what the Edwards administration is developing are scant. Edwards said he wants the work requirements to include exceptions for people in school or training programs, and he suggested volunteering could take the place of work. The governor’s office didn’t say whether Edwards would seek legislative approval before submitting the request to federal officials. While Edwards said Louisiana was “working with the same consulting firm that worked with Kentucky” on its waiver approved this month by federal officials, no contract has been signed.

 

Number of the Day

70,953 – Total state employees at the end of the 2016-17 fiscal year, down from 100,486 in FY2009 (Source: Popular Annual Financial Report/Division of Administration)