Decision day on state revenues

Decision day on state revenues

Ever since Louisiana schools, festivals and businesses began stuttering in mid-March, a big question has loomed over state government: How will the Covid-19 recession affect the budget? On Monday at noon, the state’s economists will provide the first official answer as the Revenue Estimating Conference convenes. Their decisions will determine how much money will be available to pay for public schools, healthcare, public safety and other services. The AP’s Melinda Deslatte has the curtain-raiser: 

Lawmakers expect a decline in state financing anywhere from $500 million to as much as $1.5 billion, forcing cuts across agencies to keep the budget in balance. Louisiana has two separate problems depressing state tax collections: widespread unemployment and shuttered businesses from the virus outbreak and an international feud worsening a steep decline in oil prices.

As if Louisiana’s revenue problems weren’t bad enough on their own, some members of the House Appropriations Committee are trying to make them worse. Nola.com | The Advocate’s Tyler Bridges reports on a package of bills that would put artificial restraints on the Legislature’s ability to fund essential services. Similar measures have failed to pass in previous years, but have gained fresh currency in the new Legislature. 

Four measures approved Tuesday by the House Appropriations Committee would try to restrain state spending – which would inevitably mean less money for teacher pay, police protection, health care for the poor and housing state inmates. … Jan Moller, director of the Louisiana Budget Project, was more blunt in his comments about Edmonds’ proposal. “It’s a gimmick that’s a bad idea in the best of times and an even worse idea in the worst of times,” Moller said.

 

Louisiana needs federal help
The Covid-19 economic recession will drastically reduce the revenue available to pay for essential state services. Unlike the federal government, Louisiana and other states cannot borrow money to keep services going in tough times. That means Congress will have a critical role to play in the coming months, which U.S. Sen. Bill Cassidy has recognized by filing bipartisan legislation that would send money directly to state and local governments. The Nola.com | Baton Rouge Advocate editorial board agrees: 

“If we do not provide stability for states, we risk wasting all the money spent to save small businesses,” Cassidy wrote in The Washington Post. “These small businesses need basic government services. Who will eat in a restaurant if garbage and rats are out front because a city has laid off sanitation workers?” He’s right. Let’s hope he and his allies from both parties can talk some sense into the naysayers, and help the people they all represent get to the other side of the catastrophe.

 

Corporations recommend tax cuts
A business-dominated group tasked with advising the Legislature on economic recovery is recommending that companies be shielded from lawsuits and be granted new tax breaks. Nola.com | The Advocate’s Sam Karlin writes that the 42-page report supports rolling back reforms to the nation’s most lucrative manufacturing tax break and blocking parishes from suing oil and gas companies for the damage they’ve done. 

The task force’s recommendations were largely crafted in work groups that were not open to the public. …The recommendations to cut taxes come as Louisiana lawmakers are expected to face a dire budget situation in the upcoming fiscal year. The coronavirus has wreaked havoc on the state’s economy, causing historic levels of unemployment, and oil price crash and businesses ordered shut. Tax revenues are expected to come in far below previous estimates, and economists were set to reveal their first estimates of the impact Monday at noon.

The Louisiana Budget Project submitted testimony on House Concurrent Resolutions 43 and 66, which would suspend corporate franchise taxes, and HCR 65, which would suspend the severance tax on oil and gas. 

 

A community conversation on Covid-19 and race
The Louisiana Budget Project is partnering with LSU’s Reilly Center for Media & Public Affairs on a community discussion about the centrality of structural racism in the Covid-19 pandemic. The one-hour event will take place Wednesday, May 13 at 3:30 p.m. CST. An Unequal Relationship: Race and Covid-19 will be hosted by LBP’s Director of Public Affairs and Outreach, Davante Lewis, and include public policy experts and advocates from across the country. Click here to register. The event will also be streamed via Facebook Live on LBP’s Facebook page.

On Thursday, May 14 at 10 a.m., LBP Executive Director, Jan Moller, will be discussing the state revenue crisis and its implications for the budget in a one-hour seminar on Zoom hosted by Together Baton Rouge. You can register for the seminar by clicking here.   

 

Number of the Day
$378 million – Projected revenue loss in state fiscal year 2020-21 from suspending the corporate franchise tax. Almost two-thirds of the tax is paid by corporations with a tax base larger than $100 million. (Source: Legislative Fiscal Office)