Senate President John Alario is attempting to craft a complex, short-term fix to Louisiana’s massive budget deficit that would dump the problem of finding a long-term solution in the hands of the governor and Legislature who take office in January.
Alario, the most powerful state lawmaker, said he would like to eliminate Louisiana’s structural budget deficit of $1.6 billion this legislative session, but said that is not possible given the size of the gap and the strict rules laid down by Gov. Bobby Jindal against allowing a net tax increase.
“All of this will be short-term, we’re all admitting that,” Alario, R-Westwego, said in an interview Tuesday when asked about the various tax and budget plans under private discussion. “The hard work will come next year. We don’t have time now to come up with a long-term solution.”
Alario’s comments provide the clearest indication of the path forward for state lawmakers, halfway through the two-month 2015 legislative session, as they attempt to eliminate a projected budget deficit that is 20 percent of the state’s general fund.
His comments also confirm what many State Capitol insiders have suspected: One of the four major candidates running for governor will inherit a major budget deficit from Jindal and this Legislature.
It’s also possible that the Legislature will ultimately pass a budget that Jindal cannot accept, forcing legislators to try to override a gubernatorial veto with a two-thirds vote.
The ball is now in the Senate’s hands after the House completed its heavy lifting on taxes this year by raising $615 million in revenue on Thursday. The money would come by increasing the cigarette tax, scaling back tax credits to install solar energy systems and to film movies, and trimming a number of tax breaks enjoyed by businesses and higher-income individuals.
State Rep. Joel Robideaux, R-Lafayette, said in an interview that he is not planning on having the House Ways and Means Committee, which he chairs, approve any more major revenue-raisers. His committee last week approved the 11 taxes that the House approved on Thursday.
“We’ve done our work,” Robideaux said.
Among the 11 items is one major short-term measure: House Concurrent Resolution 8 would raise $103 million only for next year by temporarily reinstituting 1 cent of the state sales tax on business utility bills.
One major tax bill remains on the House calendar. House Bill 768 by Rep. Jay Morris, R-Monroe, would raise $231 million next year by reinstituting 1 cent of the sales tax on a broad range of activities now exempt from that tax. House leaders chose not to call up Morris’ bill on Thursday for fear that it would not obtain the two-thirds vote required for passage.
The House Appropriations Committee approved the first draft of the budget on Monday. That budget, which will be heard on the full House floor on May 21, includes the $615 million in new revenue.
Alario said he is consulting with other senators to find a way to keep Louisiana’s colleges and universities and public health care system from suffering deep cuts next year. He also must consult with powerful outside interest groups and the Governor’s Office.
Kyle Plotkin, Jindal’s chief of staff, was spotted heading into a meeting with the Senate president. “There are a lot of options on the table,” Plotkin said afterward.
Among the ideas that have emerged in recent days, Alario confirmed, are a phase-out of the state corporate franchise tax, one of the two major levies on businesses in Louisiana.
Repealing a tax would normally cost the state treasury, at least in the first year. But under complex rules laid down by Americans for Tax Reform that Jindal is following, the Legislature could phase out the tax in later years but create a so-called “revenue offset” next year that would allow an equivalent amount of other taxes to be raised without being deemed a net tax increase.
Phasing out the tax could permit the Legislature next year to raise another $140 million in taxes, which is equivalent to the revenue the state is expected to collect from the franchise tax this year.
Tim Barfield, the state Revenue secretary and Jindal’s point man on taxes this session, said phasing out the tax would improve Louisiana’s tax ranking among the 50 states and simplify the state’s tax code because the franchise tax generates a large number of audits and lawsuits for his department.
But while doing so would help solve the budget problem next year, it would worsen the situation in later years as the tax was phased out.
Alario and other Senate leaders also are focusing on a proposal suggested by Jindal that would allow more taxes to be raised by diverting the revenue from those taxes into a higher education fund that would be offset by a fee of perhaps $2,000 per student.
Jindal had suggested the plan in the budget proposal he released in late February in relation to higher cigarette taxes, but lawmakers have begun to focus on it only in recent days.
Sen. Jack Donahue, R-Mandeville, the powerful chairman of the Finance Committee, is sponsoring legislation that would create the so-called SAVE fund. His Senate Bill 223 is expected to be heard in the Senate Revenue and Fiscal Affairs Committee on Monday.
Sen. Neil Riser, R-Columbia, the committee’s chairman, said he expects the committee on Monday to hear all 11 tax measures approved by the House on Thursday. Passage of those bills added up to the $615 million. House leaders said they needed another $295 million.
Of that, $180 million would go to prevent cuts to hospitals, nursing homes, the developmentally disabled, the working poor — and provide full funding for the LSU medical schools in Shreveport and New Orleans and the New Orleans hospital slated to open in August, and the other state hospitals now under private management.
“We can’t let the medical school in Shreveport go down,” said Sen. Robert Adley, R-Benton. “We have to open the New Orleans hospital.”
Legislators also want to raise another $100 million to prevent cuts to K-12 public schools statewide and to a variety of other programs, such as funding for the state’s parks and museums.
“What I see developing is everyone is trying to get through this year,” said Adley, who is sponsoring a host of bills that would mean higher taxes on businesses and local governments. “A whole lot will be left undone this year for the new folks to have to do.”
Louisiana voters will elect a new governor and 144-member Legislature in the fall. The four major gubernatorial candidates are: Lt. Gov. Jay Dardenne, U.S. Sen. David Vitter and Public Service Commissioner Scott Angelle, all Republicans, and state Rep. John Bel Edwards, D-Amite.
Alario’s words Tuesday would not come as a great surprise to the four men. Each one has said he expects to have to call a special session after taking office to deal with a leftover budget crisis.
“The next governor will have to have a good plan and hit the ground running,” Donahue said.
The four-member Revenue Estimating Conference will meet Thursday and likely certify an increase in state tax collections, making the Legislature’s job slightly easier.
“The REC won’t find $100 million,” said Jim Richardson, an LSU economist who has sat on the panel for more than 25 years and who discussed the budget privately with Alario on Monday morning.
Richardson also expects the Legislature to find no more than a one-year solution to the state’s budget deficit.
“We have to be practical,” Richardson said. “A short-term solution can allow you to survive and tackle the problem in a more systematic way later. It would be nice if we could solve the problem today, but if that’s impossible, we should make sure that the short-term solution is compatible with the long-term solution.”
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.