It’s Sine Do or Die

It’s Sine Do or Die

The Legislature has until midnight to wrap up its work in the special session, which means passing a budget bill along with the revenue measures that support that spending.

Number of the Day

$21 million - Annual cost of modestly expanding Louisiana’s Earned Income Tax Credit from 3.5 percent to 5 percent of the federal credit, which would benefit nearly 1 in 3 state income tax filers. (Source: Legislative Fiscal Office)

The Legislature has until midnight to wrap up its work in the special session, which means passing a budget bill along with the revenue measures that support that spending. There are three key bills that will be the focus of House-Senate negotiations that figure to consume the day:

House Bill 1 is the budget bill, which passed the Senate with full funding for TOPS scholarships, Go Grants, higher education and Medicaid services. It spends about $50 million less than sought by Gov. John Bel Edwards.
House Bill 27 is the major tax bill, which retains one-half of the “clean penny” of sales tax. It was rewritten Sunday on the House floor to remove taxes on farmers and manufacturers that had sparked outrage from lobbyists.
House Bill 18, a tax credit bill that limits the income tax credit for taxes paid to other states. It was rewritten on Sunday to include a modest expansion of the Earned Income Tax Credit.

The biggest question heading into the session’s final hours is whether the House will agree to the Senate’s revenue demands. Failure to do so would come at the expense of college students and various state agencies, as the AP’s Melinda Deslatte explains.

If enough taxes aren’t passed by lawmakers to pay for the budget proposal, certain portions of the bill would take pro-rata, across-the-board cuts. Those reductions would hit TOPS, college campuses and an array of departments, but health care services would be shielded from the slashing. Even with the taxes, some areas still would take cuts to keep the numbers in balance. On the list for reductions are the Office of Juvenile Justice, the attorney general’s office, the agriculture department and the agency that oversees state parks and museums.

Gannett’s Greg Hilburn reports that the revival of the EITC, which had been killed last week by a House committee before being tacked on to an unrelated bill, is key to making members of the Louisiana Legislative Black Caucus comfortable with voting to retain the sales tax.

Sen. J.P. Morrell, D-New Orleans, said the link between the earned income tax credit and the sales tax renewal could determine the fate of the special session. “I think the House has to make a decision as to whether they want to risk the sales tax by not allowing for the increase in the EITC,” Morrell said. “That’s not just a Senate problem. There are a tremendous amount of House members, in particular in the Black Caucus, that struggle with the idea of continuing a half-penny of sales tax.”

Reminder: If the Legislature fails to reach agreement today on the major tax and spending issues, they’ll be back in Baton Rouge next week to try again. The real drop-dead deadline is the July 1 start of the fiscal year.

 

R.I.P Tax Reform
While the Legislature has a chance to adjourn today without the devastating cuts to health care and higher education that seemed likely just a week ago, the revenue package that’s being debated (with the exception of the EITC expansion) looks nothing like the tax reform recommendations that came from a blue-ribbon task force in 2016. The Advocate’s editorial board laments a lost opportunity.

Little or no reform is on the agenda for anybody: The governor feels he must give in to sales taxes, the opposite of reform, to avoid budget cuts that strike on June 30. The Legislature is dominated by interest groups and talk-radio philosophers who mimic slogans about government waste and dismiss the plight of the poor. It’s a caricature of debate. Instead, as we are in the process of a sixth special session, called specifically to address taxes and spending, Louisiana is farther from reform than when HCR11 was created by the Legislature.

 

How did we get here?
As the debate over revenue and spending has dragged on, Gov. John Bel Edwards’ critics have often accused him of deceiving the public about the true extent of the budget shortfall. But the inimitable Jim Beam of the Lake Charles American-Press reminds us that the numbers come from professional economists, whose analyses are shielded from politics.

That revenue projection, like all of them, came not from Edwards but from the Revenue Estimating Conference (REC). The members of that conference are the governor, Sen. John Alario, R-Westwego, and the president of the Senate; Rep. Taylor Barras, R-New Iberia, and the speaker of the House; and a faculty member of a university or college in the state who has expertise in forecasting revenue. … The state’s Republican chairman apparently doesn’t have much faith that those individuals, most of them Republicans, can act independently of the governor.

The AP’s Deslatte, in her weekly column, notes that the “fiscal cliff” was created entirely by the Legislature through its refusal to make major tax changes permanent. It’s a mistake that’s being repeated in the latest special session, where any partial renewal of the “clean penny” of sales tax is likely to carry an expiration date.

National credit rating agencies have repeatedly raised concerns about Louisiana’s use of short-term, impermanent solutions for long-term budget imbalances. The three major rating agencies – S&P Global Ratings, Moody’s Investors Service and Fitch Ratings – all downgraded Louisiana’s credit rating in 2016 and 2017, making it more expensive to borrow money for roadwork and construction projects. In March 2017, S&P cited “uncertain revenue collections” as a problem. In April 2016, Fitch described “a reliance on one-time actions for budgetary solutions” among the areas driving its downgrade. In February 2016, Moody’s said Louisiana could help its rating by taking “recurring and sustainable actions to deal with economic and revenue declines.”

 

The next public health battle?
The United States spends more money on health care than any country in the world, overall and as a percentage of its economy. But relatively little money is spent on public health, despite evidence that such spending can pay long-term dividends in the form of longer, healthier life spans. With that in mind, the New York Times’ Upshot blog asked its readers what the next big public health campaign should focus on.

We must improve the way we nurture small children if we actually want to improve public health. Kaiser’s Adverse Childhood Experiences (ACEs) study by Dr. Vincent Felitti showed  us some 20 years ago that adversities in childhood seed both physical and mental illnesses. Kids who experience traumas have more cancer, heart disease, diabetes, depression, suicide and addiction as adults.  And there is a dose response effect: The more adversity, the worse the health outcomes.

 

Number of the Day
$21 million – Annual cost of modestly expanding Louisiana’s Earned Income Tax Credit from 3.5 percent to 5 percent of the federal credit, which would benefit nearly 1 in 3 state income tax filers. (Source: Legislative Fiscal Office)