Monday, February 22, 2016

How did we get here?

The fun is only just beginning in Baton Rouge. We're only a week into the legislative special session and already the Republicans are refusing to play nice
Time is short for coming up with a budget solution for Louisiana. The Legislature has just two weeks left in its special session to resolve the financial crisis. Both Edwards and Senate President John Alario said the House should have already started voting on tax bills, but there are no revenue bills that have broken loose from committee.

All tax and budget measures have to originate in the House, so the absence of votes by House members has stalled work in the Senate.

The governor said he thought at least the sales tax bill -- the most important tax revenue source needed to resolve the current budget crisis -- should have moved by now. Increasing the sales tax by a penny is seen as the most reliable way to raise money swiftly by the time the fiscal year ends on June 30.

"There really isn't any excuse" for not voting on any tax bills a week into the special session, Edwards said.
Remember back when Rep. Neil Abramson (D-New Orleans) decided to help throw the House speakership over to the GOP partisan cabal obstructing things now? Abramson promised us it would be okay because he was in an awesome position to "work closely with the Speaker to manage some of the important legislation for our region and critical policy-making."

So far, so bad with that. Rather than expediting matters, Republican control of the house has significantly gummed up the works as members stake out reality denying positions on both the causes of and solutions to the current quagmire. At least Cameron Henry took the weekend to think about some stuff.
But they haven't recommended a new or different plan. And a few Republicans are already saying they won't accept the tax increases Edwards proposed that would keep even more dramatic set of reductions from happening.

"I want to go on the record saying I won't vote on all the taxes" Rep. Steve Pylant, R-Winnsboro, said during a House Appropriations hearing earlier this week. He was one of three Republicans on the committee to threaten withholding votes on new taxes.

Yet Pylant and the other Republicans haven't brought forward a plan that's different from Edwards -- yet. Rep. Cameron Henry, the House Appropriations Committee chair, said members are working on an alternative set of cuts over the weekend.

The whole committee is working with staff on a master Excel spreadsheet to see what they can come up with to compete with what Edwards has proposed.

"Hopefully, by Monday or Tuesday, we will have an accurate list of everything members want to cut," Henry said.
So sometime today or tomorrow, we'll get to see whatever it is the Microsoft paperclip told them to do. 

But before we get there, and before we hear anything more about John Kennedy's"400 budget cuts" or Beryl Amedee's GoFundMe page, let's make sure we're all clear on just how it is we got here in the first place.  A good place to start with that is this NOLA.com primer by Julia O'Donoghue published last week. 
The origins of Louisiana's budget crisis are complicated and structural. The state simply isn't set up to collect enough revenue to cover its expenses, even during boom times.

But there are also short-term issues that have cropped up over the past few months, as oil prices have plummeted. One of the state's chief economists, Greg Albrecht, said this week that Louisiana has entered into its own economic downturn, even as the rest of the country's outlook is looking up.
So, you see, we're "bucking the trend" economically. And that's a problem but the larger point is that thing about Louisiana's chronic refusal to take proper advantage of its "boom times."  We've talked about this many times before.

It's no secret that the economic and fiscal fortunes of the state are tied to those of the petrochemical industry. It's also no secret that the fortunes of the petrochemical industry are especially prone to a regular boom and bust cycles.  One would hope that, by now, we would have learned to better manage things in a way that helps us take full advantage of the good times investing windfalls in infrastructure, schools, hospitals, and socking some away for when the inevitable bust comes along.

This is not how we do things. 

Instead, we prefer to shovel revenue out the window as quickly (or more quickly, even) than it comes in.  Most of this happens in the form of special tax exemptions and other "incentive" expenditures written into the tax code. According to the legislative auditor, FY 2015 is likely to end up with almost half a billion dollars more in pay outs than revenues.  Not only do we spend more money than we raise, we don't even spend that money on ourselves. We simply give it away.

In 2014, The Advocate published an excellent series on Louisiana's tax incentive programs finding the annual cost had risen over a billion dollars. Just to focus on one example, here's a separate look from this past December at the amount of money the state gave away to oil and gas firms during the height of the recent fracking boom.
Under the credit’s rules, energy producers are refunded the severance taxes on horizontal oil or gas wells for the first two years of production or until the well has paid for itself, whichever comes first. On average, drilling a horizontal well costs about $9 million.

The legislative audit noted that no other state with significant horizontal-drilling operations offered a full refund of so-called severance taxes — though some offer reduced rates.

As the use of the break exploded, so, too, did the state’s cost — from $3 million in 2005 to a high of $272 million in 2012. It cost $166 million in 2014 as drilling slowed, the report said.
Oil and gas exploration already imposes heavy costs on the state in terms of the environmental and health hazards that come with it. As taxpayers we should demand maximum remuneration for enduring this injury.  Instead, under Bobby Jindal's leadership,  we heavily subsidized it.

Why would we do such a thing? Clancy DuBos thinks he can point to at least one reason.
More likely, in my opinion, the real “paperwork” behind Team Jindal’s corporate handouts is the former governor’s campaign finance reports. If history is any guide, there’s likely to be a high correlation between the former governor’s campaign finance reports and a list of companies that received tax incentives. At a minimum, Jindal committed malfeasance by consistently telling lawmakers and the public that his budgets for the past seven years were “balanced.” They were not.
So how did we get here? In short, we've taken what should have been a fiscal windfall generated by hurricane recovery and a booming oil industry and squandered the whole of it on a political kickback scheme meant to elect Bobby Jindal President.  Look how well that's worked out for everyone.

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