The Louisiana House and Senate broke a three-day legislative logjam Thursday to move closer to a solution on filling this year’s budget deficit, but public hospitals and the state’s colleges and universities appear to remain on the chopping block without more taxes.
The impasse ended when a key Senate panel settled on its amount of budget cuts, and the House approved a 22-cent increase on cigarettes to $1.08 per pack.
While reducing the shortfall for this year’s budget, Thursday’s moves provided scant relief for solving next year’s bigger budget deficit, a monumental problem that legislators will have to grapple with after the special session ends on March 9.
In a special session since Feb. 14, state legislators and Gov. John Bel Edwards are attempting to cut enough spending and raise enough taxes to fully close this year’s $900 million shortfall, left over by Gov. Bobby Jindal and last year’s Legislature.
They are also trying to make enough progress now to make it easier to fill a $2 billion deficit when they begin their regular session on March 14. Under the state Constitution, they cannot raise taxes during the regular session, making it highly likely that they will have to hold a second special session after the regular session adjourns, to find enough revenue to eliminate that budget gap.
Thursday’s actions by the House of Representatives and the Senate Finance Committee put the Legislature on track to have a $67 million shortfall this year, according to an analysis by the Finance panel, down from the estimate of $150 million to $200 million in recent days.
Without more tax increases, one-time fixes or spending cuts, the $67 million in cuts will fall on the public/private partnership for the state’s hospitals as well as the state’s colleges and universities, said state Sen. Eric LaFleur, D-Ville Platte, who chairs the Finance Committee.
He and Senate President John Alario believe that next year’s projected budget deficit is over $1 billion in a $9 billion budget.
“It doesn’t make me feel very good,” Alario said in an interview, adding that a deficit of that size, unless filled, would “find hospitals and higher education devastated next year.”
During the Jindal years, the governor and legislators repeatedly sought short-term fixes to balance the budget to avoid raising taxes.
This year’s Legislature is moving in the same direction.
The current $67 million shortfall means that lawmakers appear to have come up with at least $835 million towards the $900 million gap they are facing this year.
That $835 million includes spending cuts and tax increases, but easily more than half would come from one-time fixes, which everyone seems to decry in theory.
That one-time money includes $328 million from the rainy day fund and a settlement with BP, $75 million from having retailers advance their sales tax payments and $80 million announced Thursday from refinancing bonds.
None of that money would be available next year.
The first step toward ending the stalemate between the House and the Senate on Thursday came when the Finance Committee approved House Bill 122, but only after adding back $69 million worth of cuts in the version approved last week by the House.
Senators called the House cuts a “sham” because they would have virtually shut down the state Department of Education, including its ability to fund the voucher program for poor children and the state’s role in administering college board tests.
The committee was able to add back the money because the $80 million became available by refinancing bond debt at a lower interest rate while extending the repayment period.
That move prompted a complaint by state Rep. Cameron Henry, R-Metairie, HB122’s sponsor. “My focus isn’t on patching this year’s problem and making next year’s worse,” Henry said in an interview.
Henry and other Republicans, however, have yet to provide an alternative by making deeper cuts acceptable to their colleagues in the Senate or approving more tax increases.
The Republicans in the House will get the chance to show their budget balancing bona fides because Alario plans to have the Senate pass HB122 on Friday and toss it back to the House to determine the level of additional cuts that members there want to make.
Henry said he would like the House to cut another $20 million or $30 million from the budget. If so, that would get the Legislature and Edwards a step closer to filling this year’s budget gap before the special session ends on Wednesday at 6 p.m.
With the Senate panel having acted Thursday, the House then moved to vote on the cigarette tax increase but not on any other major tax bills.
The cigarette tax bill passed the House on a 75-26 vote. (The recorded vote was 74-26, but Rep. Henry changed his vote from absent to yea afterward.) The 22-cent hike would raise $16 million this year and $46 million next year.
“I voted for it because there wasn’t industry opposition,” said state Rep. Lance Harris, R-Alexandria, who heads the House Republican delegation.
The biggest revenue raiser for both this year and next would come from a 1-cent increase in the state’s sales tax, House Bill 62. It would raise $210 million for this fiscal year (which ends on June 30) and $880 million for the following fiscal year (which begins on July 1).
The budget deficit calculations for this year and next year assume passage of HB62, but that’s not certain. The sales tax expires after 18 months under the House version while it lasts for five years under the Senate’s. The two chambers will have to agree on a similar length of time and win a two-thirds vote or more of their members (70 in the House and 26 in the Senate).
A revenue source that the House may consider would remove sales tax exemptions from at least of one of the state’s four pennies. Doing that would raise at least $20 million this year.
Although time is growing short, legislators in both chambers are pushing bills that would end business tax breaks, following publicity that major companies are paying little or no taxes in Louisiana.
The Senate Revenue & Fiscal Affairs Committee approved one bill Thursday by state Sen. Page Cortez that would require the nearly 200 sales tax exemptions to expire in 2017, unless the Legislature votes to keep them.
The committee approved a similar far-reaching measure by state Sen. J.P. Morrell, D-New Orleans, that would sunset all existing tax credits in 2017, including the Motion Picture Investor Tax Credit, which heavily subsidizes Hollywood to make movies and television shows in Louisiana.
“A [budget] crisis of this magnitude means everything has to be on the table,” said Morrell, who has championed the movie tax credit.
Elizabeth Crisp of The Advocate Capitol news bureau contributed to this report
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