A solution to Louisiana’s biggest budget crisis in more than 25 years remained elusive Monday — three days before the legislative session ends — when the House wouldn’t agree to a proposal seen as the best chance to keep Gov. Bobby Jindal from vetoing next year’s budget.
That proposal would create tax credits through the SAVE fund that would allow Jindal to accept the other tax measures that would raise $500 million to $600 million of new revenue next year. State Rep. Alan Seabaugh, R-Shreveport, withdrew the proposal in the face of certain defeat.
“We don’t have a plan at this point to comply with the governor’s veto threat,” Seabaugh said in a brief interview immediately afterward.
Minutes later, Jindal countered with a move to put legislators in a political box.
His chief of staff called reporters to say the governor would veto the separate revenue-raising bills passed by legislators intended to prevent deep cuts for higher education and public health care if the final version of the budget includes the net tax increase that the SAVE fund is intended to prevent.
With that move, Jindal is giving legislators a simple choice: Approve the budget with the SAVE fund before the Legislature adjourns at 6 p.m. Thursday, approve it by then with other tax offsets or face having to approve the tax measures in a veto session with at least a two-thirds vote to avoid the deep cuts to public hospitals, nursing homes, colleges and universities, and other programs.
“If they want to raise taxes, that would certainly be an option,” Kyle Plotkin, Jindal’s chief of staff, said in an interview outside the House chamber.
Of the 11 tax measures approved by the House, most were approved by a majority that fell short of the two-thirds that would be needed to override a gubernatorial veto. About 25 to 35 Republicans in the 105-member House seem likely to vote against most revenue-raising measures.
Jindal previously told reporters that he would veto the budget if it contained a net increase in taxes, meaning that the dollar amount in higher taxes was greater than the offsets created through the passage of tax cuts and tax credits.
A veto of either the budget or the tax measures threatens to force a shutdown of state government when the new fiscal year begins on July 1, including LSU and the other public colleges and universities, because the state, unlike the federal government, cannot spend money it does not have.
A veto session cannot take place until July 21, under the state constitution.
Also up in the air in the budget fight is the size of the state cigarette tax increase, the future of the solar energy and film tax credits, and to what extent businesses will lose a variety of tax exemptions.
Legislators began the session two months ago facing a projected $1.6 billion budget deficit, after passing a budget last year that they balanced with $1.2 billion that wouldn’t be available this year.
Since the session began two months ago, legislators have been trying to fill the $1.6 billion budget gap through a series of spending cuts and revenue measures that would raise the state cigarette tax, scale back the solar energy and film tax credits, and roll back a small portion of the tax breaks given annually to businesses.
Smokers and businesses would have to accept a higher tax burden, Republicans and Democrats alike have said, because balancing the budget through spending cuts alone would fall on Louisiana’s colleges and universities and public health care with devastating results.
But in closing the budget gap, legislators would have to do it while complying with the anti-tax pledge that Jindal signed in 2003 with Americans for Tax Reform, a national anti-tax group headed by Grover Norquist.
The group’s rules do allow tax increases, Norquist wrote in a letter Monday to Louisiana legislators who oppose the SAVE fund. “Removing tax credits or deductions while reducing the tax rate so that the total bill is revenue neutral is not a tax hike,” he wrote.
That is what led to the emergence of the SAVE fund, Senate Bill 284, sponsored by state Sen. Jack Donahue, R-Mandeville, the powerful chairman of the Senate Finance Committee.
It would assess a fee of about $1,500 per student and raise about $350 million total, but only on paper. As Seabaugh told House members Monday, students wouldn’t have to pay anything because Donahue’s bill also would create an offsetting tax credit for the $1,500. Nor would universities receive any new money.
However, the SAVE fund would create a tax credit for the $350 million that Jindal could use to offset $350 million of the new revenue that legislators are proposing to raise.
Seabaugh sought to attach the SAVE fund Monday afternoon to an unrelated piece of legislation in conjunction with attaching two other House measures to yet another bill already passed by the Senate. In that way, the Senate would have to accept the two House measures — which would have reduced the governor’s say in deciding which construction projects get funded each year — in exchange for the House accepting the SAVE fund.
The Senate, under Senate President John Alario, R-Westwego, regularly defers to the governor’s political needs.
The House Monday showed its anti-Jindal stripes when it approved House Resolution 183. It says the House would meet in a veto session if the governor vetoed legislation affecting funding for higher education or health care.
Seabaugh spent several minutes Monday saying the SAVE fund was needed even while offering no defense of it.
“It’s a weird program,” he told the House. “It doesn’t make sense.”
Seabaugh said it was needed to create the offsets for Jindal. “It has to be attached to this legislation to avoid a veto session.”
Seabaugh dropped his effort after being told by Rep. Jay Morris, R-Monroe, that the votes weren’t there. Morris had been in charge of keeping the tick sheet on how members would vote.
The SAVE fund remains alive after the Senate last week attached it to House bills 449, 501 and 829, all sponsored by Rep. Joel Robideaux, R-Lafayette. But as Robideaux noted in an interview, he could kill those measures rather than accept the SAVE fund.
The final decisions will be hashed out in private meetings negotiated by conference committees consisting of three House members and three Senate members for each bill.
“We still got time,” Alario said Monday after the Senate adjourned.
Meanwhile, the Senate approved, on a vote of 36-3, the state government’s $24.4 billion proposed spending plan for the next fiscal year.
Senators in quick succession then approved bills that would provide funding for construction projects and the Legislature, as well as other financial legislation.
The changes proposed in House Bill 1 by the Senate amount to a 2.4 percent decrease in appropriations compared with this year. The budget for the current year is $25 billion.
“Is this the best solution? Probably not. It gets us to a balanced budget,” said Donahue, who presented the plan.
Rollbacks of several House-passed tax breaks, suspension of some sales tax holidays, and a 72-cent tax increase on a pack of cigarettes and other tobacco products helped add about $929 million in revenues, according to an analysis by the Legislative Fiscal Office.
A drafting mistake in House Bill 805 inflated that amount by about $255 million. The mistake would reduce the refundable credit on inventory taxes by 75 percent (instead of 25 percent as originally contemplated). But talk on the Senate floor was that a fix could wait until the conference committee meets to hash out disagreements between representatives and senators.
The bills affecting tax credits would apply to all tax returns and claims received after July 1, regardless of the tax period for which the return applies, according to the Legislative Fiscal Office.
The spending plan includes a $46 million increase in state aid for public schools, down from the $85 million in the House-passed budget.
The Senate version includes $40.6 million to answer enrollment increases and $5.4 million to help finance often costly special education assistance.
The Senate removed the $36.2 million increase for all public schools requested by the state Board of Elementary and Secondary Education and endorsed by the House.
If the Senate version prevails, it would mark the sixth time in eight years that state aid for public schools is virtually frozen.
Mark Ballard, of The Advocate’s Capitol news bureau, contributed to this report.