Efforts to settle Louisiana’s budget crisis – the worst since the late 1980s – are coming down to the wire Thursday, when the legislative session ends at 6 p.m. But a deal appears at hand between the House and Senate.
State House and Senate leaders exchanged competing budget proposals Wednesday, before convening a final meeting at 10 p.m. with Domino’s pizza in the first-floor Capitol office of Senate President John Alario, R-Westwego, attended by House Speaker Chuck Kleckley, R-Lake Charles, and their chief lieutenants.
“We’re a lot closer right now than we were earlier,” Kleckley said, as he departed from the closed-door meeting at 10:30 p.m. with half a dozen Democrats and Republicans. “We’re quitting for now.”
“We’re very close,” Alario said a few minutes later as he emerged from his office with his own bipartisan group of senators. “We have to check with our members, and they have to check with their members. We just have to put the finishing touches on it.”
Failure to reach a budget deal before adjournment would be nearly unprecedented for the Legislature and, in a worst-case scenario, would lead to a state government shutdown after July 1 when the new fiscal year starts.
“I guess we’ll see what happens about 2 p.m. tomorrow when the walls and windows in the Capitol seem to start closing in,” state Rep. Sam Jones, D-Franklin, said in an interview Wednesday night.
Even if legislators reach a deal, Gov. Bobby Jindal has promised to veto the budget and the tax measures that fund it if he deems that the budget would cause a net increase in taxes.
At stake Thursday is state spending for hundreds of public institutions and programs, including LSU, Southern University, the University of New Orleans, Baton Rouge Community College, the soon-to-open New Orleans hospital, Our Lady of the Lake, Lafayette General Hospital, health insurance for 56,000 working poor people in New Orleans and the LSU medical schools in Shreveport and New Orleans.
Legislators are proposing to raise $600 million to $700 million to fund these programs, but exactly who would face a higher burden is part of the last-minute dispute.
Legislators face several hurdles to reaching a deal.
They have to bridge their differences, which center on how much cigarette taxes should be increased, how much a business sales tax break should be shaved, how much spending should be increased on K-12 public schools and whether to keep a much-criticized tax credit known as the SAVE fund.
Even if they overcome their differences, the budget crisis would not end if Jindal vetoes the budget or the revenue measures that lawmakers are moving to approve to prevent deep cuts to the state’s public colleges and universities and public health care system.
A Jindal veto would force legislators to try to override him at a special veto session that would begin July 21. If he vetoes just tax measures, the state would have enough money to keep operating in July while the elected officials tried to resolve the mess.
The latest developments in the budget crisis are taking place two weeks before Jindal’s June 24 expected announcement for president in Kenner. The governor is scheduled to waste little time in resuming his out-of-state campaigning with the Legislature out of town. He will travel to South Carolina on Friday and Saturday and to Iowa on Monday.
Legislators began the session facing a projected $1.6 billion budget deficit next year in what veteran observers of state government call the worst budget crisis since the oil bust in the late 1980s, when Gov. Buddy Roemer inherited a nearly bankrupt government from Gov. Edwin Edwards. Legislators are proposing to close the deficit with a mixture of revenue increases and spending cuts.
One of the main differences between House and Senate members Wednesday was the cigarette tax, which is currently 36 cents per pack, the third-lowest in the country.
The Senate wants to raise the cigarette tax by 72 cents to reach $1.08, the combined average of neighboring Texas, Arkansas and Mississippi. The Senate also wants to increase the tax on other tobacco products. In all, this proposal would raise $188 million next year.
A majority of the House wants a 32-cent tax increase only on cigarettes that would raise $68 million. So the difference between the two chambers on cigarettes and tobacco products is $120 million.
Senators have noted privately that Kleckley and Rep. Lance Harris, R-Alexandria, the chairman of the House Republican Caucus, own convenience stores that are big sellers of cigarettes and other tobacco products.
House leaders have proposed to make up the $120 million difference with the Senate by taking away part of a sales tax break that businesses get when they pay their utility bills. Under current law, businesses are exempt from the four-cent state sales and use taxes on their utility bills.
Both the House and Senate approved taking back one cent of this sales tax break through the passage of House Concurrent Resolution 8 by Rep. Jack Montoucet, D-Crowley. This one-year resolution would raise $103 million.
House leaders are now proposing to take back three cents of the four-cent sales tax break, which would raise an additional $214 million — enough to tax cigarettes at the lower 32-cent rate and provide $38 million more in funding for K-12 schools that the House favors, although only for one year.
Sen. Jack Donahue, R-Mandeville, said reimposing the sales taxes on business utility bills would hit large manufacturing plants especially hard.
“Their energy costs are huge,” Donahue said.
Gregory Bowser, a lobbyist for the Louisiana Chemical Association, said petrochemical plants would pay 75 to 80 percent of the higher tax burden.
In an interview, Montoucet said the companies can afford it, given that natural gas prices have declined in recent years. “How much do you want to bring home?” he asked of the petrochemical companies.
The House also is proposing to cap the state film tax credit at $220 million, up from the Senate’s proposed $180 million cap. The controversial program is expected to cost taxpayers about $250 million this year.
Overhanging the differences over the tax issues is the SAVE fund. Passage of it is key to allowing Jindal to claim that the budget did not contain a net tax increase because the SAVE fund creates what critics calls phantom tax credits. With SAVE, Jindal is following the guidelines from Grover Norquist’s Americans for Tax Reform, a Washington, D.C.-based anti-tax group.
The Senate wants SAVE in order to get Jindal to accept the overall budget.
House members are resisting the SAVE idea and have stated their willingness to override the governor.
“I take great offense that he even has one thing to say about what goes on in Louisiana,” Harris told the East Baton Rouge Republican Party on Tuesday. “I want Grover Norquist to come down here and tell me that SAVE is revenue neutral. It’s a bunch of smoke and mirrors. It’s the biggest bunch of hooey I’ve ever seen in my life.”
Jindal met with six or seven House members — including Harris — just before noon Wednesday and a similar group of senators just afterward.
Jindal, who turned 44 on Wednesday, is the chief proponent of the SAVE fund.
“He restated his position,” Rep. Jim Fannin, R-Jonesboro, said afterward.
Given the threatened budget cuts, several higher education leaders came to the Capitol on Wednesday to emphasize their support for SAVE. They fear that a gubernatorial veto will cost them 25 percent of their funding next year — money they would lose if the Legislature cannot override a gubernatorial veto.
Those at the Capitol on Wednesday afternoon included F. King Alexander, who is LSU’s president and chancellor; Monty Sullivan, who is chancellor of the Louisiana Community and Technical College System; Sandra Woodley, who is president of the University of Louisiana System; Commissioner of Higher Education Joe Rallo; and Alexandria businessman Roy O. Martin, who is chairman of the Board of Regents, which oversees the higher education system.
“My goal is to close this building by tomorrow night and not all the higher education buildings,” Martin said in a brief interview.