The state Senate voted to increase the cigarette tax by 72 cents per pack Friday as senators tried to raise the revenue needed to prevent deep spending cuts to public health care and public colleges and universities.
But the cigarette tax increase complicated the already-complicated plans to balance the state budget by next Thursday, when the legislative session adjourns, without triggering a veto from Gov. Bobby Jindal.
The 72-cent increase — which would give Louisiana a $1.08 cigarette tax that matches the Southern regional average — goes too far, House Speaker Chuck Kleckley, R-Lake Charles, said in an unsolicited interview.
“It’s way too high,” Kleckley said, noting that the House had approved a 32-cent cigarette tax increase that would increase the Louisiana rate to 68 cents. “The best thing to do is completely remove the cigarette tax from the table. Let’s work to find revenue sources from other bills coming from the Senate.”
Kleckley, who owns three convenience stores, which are major sellers of cigarettes, noted that the House approved the 32-cent increase with 78 votes, only eight more than the minimum two-thirds required in the 105-member House.
The proposed cigarette tax increase was 64 cents per pack when the Senate Friday took up the legislation, House Bill 119. Sen. J.P. Morrell, D-New Orleans, moved to tack on an additional 8-cent increase. The measure also would raise taxes on other forms of tobacco, raising $188 million next year. It now goes to the House, where an uncertain fate awaits it.
With time beginning to draw short, Kleckley’s comments reflect the continuing difficulty for legislators to balance a budget that spares higher education and public health care from deep cuts, all the while satisfying Jindal’s demand that the budget contain no net tax increases.
The budget now contains about $750 million in new money as approved Thursday night by the Senate Finance Committee.
Some of the additional dollars would restore some of the deep cuts to state government agencies made by the House; would fund some of the so-called “legacy costs” that pay for pensions, insurance and other benefits of former state employees in the LSU medical schools in New Orleans and Shreveport; and would provide more funding for the private firms contracted to run most of the state’s charity hospitals.
The Senate put additional money in state parks, state museums and the state library, which had suffered deep cuts in the Jindal administration’s proposal and in the House budget. Additionally, senators restored some of the money needed to pay for standardized tests in the public schools, which had been removed by the House.
The state’s public colleges and universities escaped the draconian cuts many feared at the beginning of the budget process.
The House funded higher education at $573.6 million. Senate Finance gave additional monies to Southern University and Grambling State University — both institutions have been suffering financially. The LSU Agricultural Center and the LSU Pennington Biomedical Research Center also received more money from the Senate.
The effort to balance the budget without risking a gubernatorial veto led to a rare breach in senatorial comity late Friday afternoon when tempers flared during debate over the most controversial tax measure this session.
Senate Bill 284 would create the much-derided Student Assessment for a Valuable Education (SAVE) fund. Supporters have admitted that it is a means for Jindal to stay within the anti-tax parameters established by Americans for Tax Reform, a Washington, D.C.-based group influential with conservatives that is led by Grover Norquist.
SB284 would assess a phantom fee on students at public colleges and universities that they wouldn’t actually have to pay because it would be offset by a tax credit for the same amount. But the tax credit would create as much as $350 million in tax offsets for Jindal to apply against other revenue-raising measures to stay within ATR’s guidelines.
The House Ways and Means Committee on Wednesday killed the SAVE plan on a 10-9 vote. The Senate Finance Committee revived it that night by attaching it to three bills sponsored by the Ways and Means chairman, state Rep. Joel Robideaux, R-Lafayette, who voted against the fund.
First, though, state Sen. Karen Carter Peterson, D-New Orleans, asked her colleagues to strip the SAVE fund from Robideaux’s HB 449.
The SAVE fund “doesn’t do anything because it’s nonsense,” Peterson said. “This is one of the worst bills I’ve seen in my entire career.”
State Sen. Jack Donahue, R-Mandeville, is the reluctant sponsor of the measure as the chairman of the Senate Finance Committee.
“In my eight years here, I’ve had bills that were a lot more fun than this bill,” Donahue told senators, before saying he was pushing the measure to create the tax offsets Jindal needs to avoid vetoing the budget.
Senators rejected Peterson’s effort.
Laughter then began to break out from individual senators throughout the chamber. It was prompted by an amendment to the SAVE fund by state Sen. Eric LaFleur, D-Ville Platte, that had just popped up on their computer screens.
LaFleur’s amendment proposed that it be renamed the DUMB fund.
“It describes the bill for what it is, dumb,” LaFleur told his colleagues, as they continued to laugh.” I’m just trying to be candid for the public.”
An angry Donahue strode the microphone at the front of the Senate chamber.
“I’m insulted by it,” Donahue said. “This makes a mockery of what we’re doing.”
As he walked away, he and LaFleur shouted at each other. LaFleur then denounced the measure but, with his point made, withdrew the amendment. Senators approved the bill.
State Sen. Ben Nevers, D-Bogalusa, followed by asking for calm.
In all, senators raised about $300 million in new tax revenue Friday. Besides the cigarette tax, they also approved House Concurrent Resolution 8, which would raise $103 million for next year only by temporarily restoring 1 cent of the state sales tax exemption on utility bills that businesses pay. It must return to the House for final passage.
Senators are poised to raise more money Saturday. House Bills 624, 629 and 635 would raise a total of $350 million more.
But the Senate Revenue and Fiscal Affairs Committee also proposed to give back a portion of that when it approved a phase out of the corporate franchise tax over five years. House Bill 828 would cost the state $36.5 million next year and $912 million over five years.
Tim Barfield, the Revenue secretary and Jindal’s point man on budget issues, said eliminating the tax is good policy because it’s complicated and discourages investment in Louisiana. He also acknowledged that it is a key component for Jindal to stay within ATR’s tax neutrality rules.
State Sen. Bob Kostelka, R-Monroe, attempted to kill the HB 828 but fell one vote short.
“We can’t afford this right now,” Kostelka said afterward. “We’re millions of dollars in the hole.”
When reminded that the purpose is to help achieve tax neutrality for Jindal, Kostelka replied, “I’m not afraid of overriding the governor.”