Revenue stalemate undermines reform

Revenue stalemate undermines reform

Gov. John Bel Edwards’ budget proposal for the 2019-2020 fiscal year is scheduled to be released Friday morning, but what he will actually present is still a mystery. The uncertainty centers around the refusal of House Speaker Taylor Barras to recognize updated revenue forecast by the Revenue Estimating Conference. The REC was was designed to be a as transparent and nonpolitical as possible to ensure that policymakers had a reliable and up-to-date forecast on which to build the state budget. But as LBP’s Jan Moller outlines in a new blog, the injection of politics into this non-political entity is bringing the entire budget process to a halt.

Because of Barras’ refusal to update the revenue forecast, Louisiana is operating on a revenue forecast developed June 26 – a few days before the start of the current fiscal year. Since then nearly eight months of additional data has accumulated to improve the accuracy of the forecast, and the news is encouraging. According to the most conservative forecast, from the Legislative Fiscal Office, Louisiana has an extra $122 million available this year, and $90 million more than anticipated in the fiscal year that starts July 1. The Office of Planning and Budget is even more optimistic, predicting nearly $149 million more for this year and $134 million for FY 20. Barras has failed to produce a plausible explanation for refusing to update the forecast, beyond claiming “heartburn” over uncertainty in the state’s economy. But economic conditions are always uncertain. And while policymakers still have time to resolve the dispute – the new fiscal year doesn’t start until July 1 – this unprecedented gambit has already caused real damage by undermining one of the most important and time-tested reforms to Louisiana’s budget process.


Thousands receive Medicaid denial letters
More than 37,000 Medicaid recipients received letters last week informing them that their enrollment in the health insurance program could be terminated. The letters by the Louisiana Department of Health (LDH) were the result of a new computer upgrade that regularly checks to determine if enrollees earn too much money to receive the taxpayer-financed health coverage. According to LDH, nearly all of the tens of thousands of individuals who received denial letters are non-elderly adults enrolled through the Medicaid expansion that Gov. John Bel Edwards enacted in 2016. The AP’s Melinda Deslatte reports:  

Anyone seeking to challenge the decision and retain their coverage needed to reply by this week. Medicaid coverage will end by March 31 for those who can’t prove they meet the income criteria. … (LDH Secretary Rebekah) Gee said some people enrolled through Medicaid expansion likely have fluctuating or seasonal changes in employment that could keep them going in and out of the Medicaid program throughout the year, as their wages change. Others deemed ineligible for coverage, she said, hopefully got a job that came with insurance benefits. But some bumped from the Medicaid rolls likely will become uninsured. The health department will be providing those people, Gee said, with information about how to seek coverage through the federal health insurance exchange.


Governor defends ITEP changes
Prior to a recent change, Louisiana’s Industrial Tax Exemption Program (ITEP) came under fire for granting companies exemptions from local taxes without input from local taxing authorities. In 2016, however, an executive order by Gov. John Bel Edwards gave local governments more control over the exemption, drawing ire from some in the business community. At a business summit on Thursday, Edwards defended his changes to Louisiana business leaders. The governor said he would consider tweaks to the application process, but will not eliminate local entities’ ability to weigh in on ITEP applications before forgoing tax dollars. The Associated Press has the story:

“Everything about our direction in the Industrial Tax Exemption Program is intended to prosper Louisiana,” the governor said. “We’re going to go to bat for our manufacturers. We’ll do that every day of the week because we need for them to succeed.” Since taking office in 2016, Edwards limited the program to an 80 percent tax break over two five-year terms and required businesses to create or retain jobs with the projects seeking exemptions. In addition, local parish councils, police juries, sheriffs and school boards that stand to lose the property tax money can jettison the tax break applications. … “You should know that even with the changes we’ve made, our ITEP program remains one of the most generous in the country,” the governor said. “And it is certainly competitive.”


Recommendations for Opportunity Zones
Opportunity Zones created by the 2018 federal tax cut law were billed as incentives for investment and economic development in low-income areas. But there are still serious questions about about whether the program will actually help the poor or just a boon for developers. Don Pierson, Secretary of Louisiana Economic Development, who played an integral part in selecting hundreds of these zones in Louisiana, co-authored an op-ed in The Hill outlining recommendations to ensure the program works for businesses investing in these areas. Whether their proposals will work as well for the communities Opportunity Zones are intended to serve as they will for investors remains to be seen.

The scale of need is vast. As recently as 2016, more than three-quarters of all U.S. counties still contained fewer places of business than before the recession, according to the Economic Innovation Group. If current trends continue, some of the country’s most distressed census tracts may never recover the jobs they lost to the Great Recession. The status quo would have investors continue to pour capital into the places already doing well. Opportunity Zones have the potential to change investor behavior by providing an incentive to take off blinders and consider investing in spaces and businesses that can bring new vitality and opportunity to places that have been left behind.


Number of the Day
$149 million – Additional revenue available for the 2018-19 fiscal year that has not been recognized by the Revenue Estimating Conference. (Source: Office of Planning and Budget)