A Louisiana House legislative committee on Sunday abruptly canceled plans to take up a crucial but convoluted tax measure on Monday — a measure whose fate could determine whether the Legislature will confront Gov. Bobby Jindal over next year’s budget in the final days of the legislative session.
Senate Bill 284 would create a tax credit involving the state’s public colleges and universities that is so complicated even supporters have trouble explaining it. The Ways and Means Committee on Sunday afternoon canceled the hearing.
Legislative sources said two factors drove the decision: a need to amend the bill to try to win passage in the face of opposition and uncertainty over the Senate’s plans with tax measures already approved by the House that would raise $615 million next year. The Senate Finance Committee is planning to take up the tax measures on Wednesday.
SB284’s sponsor is Sen. Jack Donahue, R-Mandeville, who chairs the Finance Committee.
“I plan to reschedule after giving Senator Donahue and the administration time to address questions that have arisen,” Rep. Joel Robideaux, the Ways and Means chairman, said in a written statement Sunday.
His decision raises questions over whether legislators can pass a budget that meets their priority — giving higher education institutions and public health care as much money next year as they are getting this year — while meeting Jindal’s demand that they do so without allowing a net increase in taxes.
The key to the entire effort is SB284, which would create what supporters call the SAVE fund but which faces strong resistance.
“There’s broad concern among Democrats about the proposal, and I’ve heard that from Republicans, too,” said Rep. Walt Leger, D-New Orleans and the speaker pro tem.
If the bill doesn’t pass, lawmakers say they will likely face a showdown with Jindal by proceeding to pass a budget that he would veto for raising taxes.
“If that bill goes down in flames, you almost don’t have any other choice but to vote for an override of the governor,” Leger said.
He said he is undecided, as did Robideaux, R-Lafayette, whose views carry substantial weight with Ways and Means members.
Senate President John Alario, R-Westwego and the governor’s most important ally in the Legislature, said in an interview Thursday that he doesn’t believe the House or Senate could muster the two-thirds vote needed to override Jindal.
Robideaux and other House leaders have said they are willing to try, a reflection of Jindal’s waning influence with lawmakers.
A measure of the stakes at play could be seen when Jindal, who rarely meets with lawmakers, sought support for the plan Thursday morning at a hastily called gathering with half a dozen House leaders and another half-dozen higher education leaders.
Critics call the tax break “smoke and mirrors,” “a shell game” and “a ridiculous scheme,” to cite several criticisms.
What’s not in doubt is the reason behind the measure: It is needed to allow Jindal to stay within the anti-tax guidelines established by Grover Norquist’s Washington, D.C.-based group, Americans for Tax Reform, while accepting measures already approved by the Legislature that ATR would otherwise label as tax increases.
The House and a Senate committee have approved $500 million or so in measures that would normally violate ATR’s anti-tax pledge — a pledge that Jindal signed in 2003 when he narrowly lost the governor’s race.
Jindal has promised to veto the budget that lawmakers are drafting if it contains those tax measures unless they approve an equivalent amount of tax decreases or offsets.
SB284 is critical to creating those offsets needed to get him to accept the budget.
In all, legislative leaders say passage of the measure could allow Jindal to accept $350 million of the $500 million or so that the other measures would raise.
But the bill is causing significant angst among legislators because it would essentially lead to a phantom fee per student and offsetting tax credit to create the $350 million on paper that Jindal could apply against the other revenue-raising measures. Another concern: It would create a tax credit for the tax-exempt higher education institutions.
Here’s how the scheme would work: LSU, Southern, UNO, Delgado and the other public colleges and universities would impose a fee of about $1,500 on each of the 220,000 or so students enrolled at their campuses. This would raise about $350 million in theory.
But the students wouldn’t actually have to pay the fee. That’s why it can be viewed as a phantom fee. Instead, the students would receive a tax credit equivalent to the $1,500 fee.
In practice, the scheme calls for the tax credit to be assigned to the state Board of Regents — which oversees higher education institutions — which would then get the phantom fee payments from the Department of Revenue for bookkeeping purposes.
Rep. John Bel Edwards, D-Amite, is one lawmaker who is scathing in his analysis of the bill.
“The idea that we would do that to satisfy Bobby Jindal and the stupid pledge he made to Grover Norquist is just ridiculous,” Edwards said in an interview. “It’s a ridiculous scheme. It’s the worst piece of legislation I’ve seen as it relates to fiscal policy.”
“I think it’s nonsense on a stick,” state treasurer John Kennedy said in a separate interview. “Is that the best we can do — come up with more smoke and mirrors? No rational person would come up with that policy.”
Analysts say the beauty of the plan, from Jindal’s standpoint, is that a fee increase does not violate ATR’s rules since it pays for a specific service, while a tax increase would run afoul of ATR.
The other beauty: the money raised by the creation of the tax credit to eliminate the fee can be counted as an offset against the $500 million in other revenue-raising measures. Cutting taxes is one way to create an offset; creating a tax credit is another.
The Legislature also is moving to create another tax offset by phasing out the corporate franchise tax, through House Bill 828, sponsored by Rep. Cameron Henry, R-Metairie.
Donahue said his legislation is needed to ensure that Jindal will sign the budget bill.
“It doesn’t do any good if the governor feels like he has to veto it,” Donahue said in an interview.
Jindal defended the plan with reporters on Thursday, saying it could create a dedicated source of revenue for the higher education institutions. He did not address concerns that he is simply trying to comply with the Norquist pledge.
In his private meeting earlier that day with House and higher education leaders, Jindal suggested that failure to pass Donahue’s bill could create a $350 million hole in the budget that would force him to cut state aid to public colleges and universities.
Jindal did not win over Rep. Katrina Jackson, D-Monroe, who was one of those who attended the meeting.
“It’s a shell game,” Jackson said in an interview. “Whether it will work or not is questionable.”
Jindal did win a public statement of support Friday from the Board of Regents, Commissioner of Higher Education Joseph Rallo and the heads of the four higher education systems.
“We believe that SAVE is simply not just a piece of proposed legislation, but a viable solution that will reduce the fiscal needs for higher education and positively impact the future prosperity of this state,” the statement read.
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.