Thursday, January 21, 2016

Who will buck the trend now?

Tuesday afternoon, the Governor and his staff unveiled plans for closing the $750 million "gap" in this year's state budget and an expected $1.9 billion shortfall in the next budget cycle. Some people were disappointed to learn the primary tool chosen for that job would be a regressive sales tax hike.
Gov. John Bel Edwards is proposing to increase the state sales tax by 25 percent on April 1 -- adding an extra penny to the existing 4-cent-per-dollar levy -- to get the state's immediate budget crisis under control.

The Democratic governor said his predecessor, Republican Bobby Jindal, left the state's budget in such disarray that hundreds of millions of dollars in tax increases would be needed to keep public education and health care programs from devastating cuts.

"The need for additional revenue is now and it is acute," Edwards said at a press conference Tuesday afternoon (Jan. 19). "This administration will remove the smoke and mirrors and provide the facts about where we are and where we need to go."
But before we go all apoplectic about how John Bel done hauled off and betrayed us all and whatnot, let's consider the actual circumstances here. The most obvious circumstance being the fact that Bobby Jindal did, in fact, leave a wreck behind him.  Lamar revisited that for us here this morning.
In his eight years as governor, Bobby Jindal never met a tax cut he didn’t support. “Louisiana isn’t a poor state,” he said frequently on the campaign trail in 2007. It wasn’t true then, and most certainly, it’s not true today. His reflexive, obstinate opposition to any and all taxes combined with decreases in the price of oil (which provides a significant portion of the state’s revenue) created a perfect storm. Louisiana was his great experiment in the Grover Norquist School of Economics, and it failed miserably.

Hospitals and emergency rooms were shuttered. Hundreds of thousands of working class citizens were denied access to health insurance due to his refusal to accept $3 billion in federal support for Medicaid expansion. Millions were drained away from public education in order to prop up a string of fly-by-night, unaccountable voucher schools.

We spent millions more litigating against marriage equality and public records disputes and unconstitutional laws regulating access to abortion. We burned a fortune building sand berms that disappeared almost as quickly as they were constructed in the aftermath of the BP oil spill.

In the last several years, we’ve squandered billions in order to lure large employers into Louisiana, an investment that has remained largely elusive and has done nothing to improve the state’s bottom line. We repealed a law, which had only recently been enacted through a popular statewide referendum, that closed the loopholes on double-dipping federal and state tax deductions, costing nearly $300 million a year in revenue.
So, yes that is a mess. And it's not a mess that can be immediately swept away in one session.  In fact, when it comes to figuring out how to resolve the $750 million hole in this year's budget, the options are limited in the extreme. Of course we would love to reinstate the Stelly Plan and set a more progressive looking state income tax bracket.  Of course we would love to revisit many of these notorious tax credit "incentive" giveaways.  We'd like to look at some of these odd special sales tax exemptions as well. We'd even be open to the idea of eliminating or reducing the federal income tax exemption claimed by state taxpayers (although I'll admit I'm skeptical of that one.)

Unfortunately all of those options require more legislative ju ju.. and in some cases constitutional amendments than there is time to accomplish in the February session. And either way, nothing you can do with income taxes is going to help with the dire need to come up with $750 million by June of this year. The sales tax hike is the only arrow in the quiver capable of hitting that target. No one is happy about that but it has to be done.

The good news is the Edwards people appear to understand this.  In fact, they're already talking about causing it to expire as soon as more palatable fixes can be put in place. 
The Edwards administration says it considers the sales tax increase a "bridge" measure that would be rolled back once other revenue sources for the state government are secured. Other tax hikes -- such as those on cigarettes  -- are intended to be permanent.

Trying to fill a $750 million budget gap in the last quarter of the fiscal year puts significant constraints on what can be done to raise more money or cut services. Many of the things Edwards discussed on the campaign trail as potential budget fixes -- including getting rid of ineffective tax credits and exemptions -- won't bring in money quickly enough to solve the immediate problem.
Not that that will be easy.  In the almost certain to be worsening economic climate, revenues of any sort will be more and more difficult to find.  And now that the recent oil and gas boom has gone bust, don't expect to read too many articles about how Louisiana is "bucking the trend" this time around.
Four south Louisiana businesses sent new or updated layoff notices to the Louisiana Workforce Commission in the past week, a move that could affect more than 580 employees.

Companies involved are the Noranda alumina plant in Gramercy; a Noble Drilling Inc. facility in Galliano; Trinity Marine Products in Madisonville; and Garden City Group in Hammond.
All this is to say that if the Edwards administration lives up to its promise to remove the "smoke and mirrors" from the state budget process, we should expect to be dealing with more bad news and bad choices for the foreseeable future.

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