Legislative leaders on Tuesday turned to Plan B on how to raise revenue for next year after vigorous lobbying by local government officials derailed their initial plan on Monday before the state Senate tax-writing committee.
The new approach calls for the spending committee — Senate Finance — on Wednesday to hear the main revenue-generating measure, which as before would repeal the state’s business inventory tax. That move could save the state as much as $500 million per year and would be a key piece of the Legislature’s efforts to close a $1.6 billion budget deficit projected for next year.
In an interview, Senate President John Alario, R-Westwego, said he expects Senate Finance to approve the proposed constitutional amendment, Senate Bill 177, and send it to the Senate floor. Once that happens, he said, the House tax-writing committee — Ways and Means — can begin approving revenue-raising measures — bills that the committee chose not to hear on Tuesday as planned.
“We’re trying to get it on the floor, so the House has the signal they need,” Alario said. “We’re way, way ahead of ourselves in time. But we’re trying to avoid a crunch late in the session.”
State Sen. Robert Adley, R-Benton, is the sponsor of both inventory tax repeals, SB177 and Senate Bill 85.
On Monday, Adley deferred consideration of SB85 before the Senate Revenue and Fiscal Affairs Committee.
Adley told the committee members and the audience — mostly business lobbyists and local government officials — that he couldn’t seek a vote on SB85 that day, after legislative staff determined that his legislation would raise money in future years but not next year, when it matters most to lawmakers.
What Adley didn’t say — and which The Advocate determined by polling committee members on Tuesday — is that the Revenue and Fiscal Affairs Committee was going to defeat SB85 in its current form.
Six of the 11 committee members said in interviews that they would have voted against SB85 because repealing the inventory tax would have cost local governments several hundred million dollars without a clear plan of how to offset that loss.
“It has too much impact on our school boards, the sheriffs and local governments in general,” said state Sen. Sharon Broome, D-Baton Rouge, who would have cast one of the no votes.
Asked if her ambitions to be elected mayor of Baton Rouge factored into her decision, Broome laughed and said, “I have a heightened sensitivity and respect for local government.”
The political muscle that local government leaders displayed to waylay Adley’s initial effort on Monday could pose a major problem for legislative leaders as they try to craft a budget-balancing plan.
Senate leaders had to resort to an unusual move Monday afternoon just before they adjourned by moving Adley’s SB177, with only a handful of senators knowing what was happening, from Revenue and Fiscal Affairs to Senate Finance, where it stands a better chance of passage. No legislators sought to block the move.
The complicated politics stem from the unusual nature of the inventory tax and the size of the budget deficit. Businesses pay the tax as part of their property taxes to local governments, which use the money for their schools, police and other services.
Businesses then turn around and get a dollar-for-dollar credit for the taxes they pay to local governments. Those inventory tax credits cost the state $454 million last year, much of it paid to companies that actually used the credit to receive a refund from state government.
So while repealing the inventory tax would save the state the $454 million, it would cost local governments at least that amount.
State Sen. Yvonne Dorsey-Colomb, D-Baton Rouge, was another member of the Senate Revenue and Fiscal Affairs Committee who said she would have voted against Adley’s SB85.
“Local governments would not be able to absorb the loss,” she said.
The others who said they would have voted against SB85 were: Sen. Rick Gallot, D-Ruston; Sen. John Smith, R-Leesville; Sen. Bob Kostelka, R-Monroe; and Sen. Gary Smith, D-Norco. The other committee members either supported the measure or were noncommittal.
Legislators — Republicans and Democrats alike — have said they have to raise hundreds of millions of dollars this year to help balance the budget because spending cuts alone would mean having to close college campuses and public hospitals.
Alario said SB177 will remain on the Senate floor without action while the Ways and Means Committee and the full House begin approving tax bills.
Ways and Means was scheduled to hear up to 23 revenue-raising bills on Tuesday, but Committee Chairman Joel Robideaux, R-Lafayette, deferred consideration of them until the Senate committee acts first.
Adley said he will have SB177 amended so it raises the necessary revenue next year.
Alario and Sen. Jack Donahue, R-Mandeville, who chairs the Senate Finance Committee, promised that the final inventory tax repeal approved by the Senate will include a mechanism for local governments to offset the money they would lose.
“They are concerned,” Donahue said. “I can understand that. But the Legislature represents them, also. We’ll make sure they are taken care of.”
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.