The Republican leaders of the Louisiana House have been promising for weeks to offer solutions for the huge budget hole that the state is facing next year.
Whether they actually have one will become clear on Monday and Tuesday when the House’s tax-writing committee considers a number of plans that would raise more money. In all, the committee members will have to wade through up to 40 bills on their agenda.
The Republican-led House on Thursday passed an initial version of the budget that its leaders say would eliminate about half of next year’s projected $1.3 billion budget deficit by clamping down on unnecessary spending. They haven’t explained yet how they would make up the difference, about $650 million.
The state House has agreed to a $29 billion spending plan for the coming year that would fully-fund TOPS scholarships but doesn't fund the state agencies that oversee health and social services to the levels that leaders say is needed to fund critical programs.
So the question before the House Ways and Means Committee is whether enough Republicans will support raising more revenue to help fill that deficit, known inside the State Capitol as the “fiscal cliff,” when $1.3 billion of temporary taxes will fall off in mid-2018.
“We have been stuck in a crisis for a few years,” state Rep. Julie Stokes, R-Kenner, said in an interview. “We could, as Republicans, achieve tax reform and create a win from this crisis. But instead we just keep prolonging it.”
Outside political groups – such as Americans for Prosperity – are pressuring committee members to vote against raising more taxes.
The hearings will take place at the halfway point of the 60-day legislative session that ends on June 8.
Hanging in the balance is whether lawmakers can forge an agreement on the budget that must be in place by July 1, the start of the 2018 fiscal year, or whether they will dissolve into the type of partisan gridlock bedeviling Washington. Also at stake is whether they will solve the following year’s fiscal cliff, which is on the agenda this year because the Legislature cannot raise taxes next year during its regular session.
“If these expiring taxes are not replaced with stable, recurring revenues, it would create unprecedented hardship for Louisiana’s universities, health care providers and others who depend on state resources,” Jan Moller, the director of the Louisiana Budget Project, a left-of-center nonprofit in Baton Rouge, wrote to Ways and Means members on Monday. “Restoring stability to the state budget – and creating more certainty for businesses and potential investors – cannot wait another year.”
This year’s budget is balanced because lawmakers last year approved a penny increase in the state sales tax that is set to expire in mid-2018. The scheduled disappearance of the penny comprises about $850 million of the $1.3 billion fiscal cliff. As The Advocate reported a week ago, many legislators believe that any fix for the fiscal cliff would include temporarily renewing either the entire penny or a portion of it.
State Sen. JP Morrell, D-New Orleans, who chairs the Senate tax-writing committee, fears that failing to reach agreement either on next year’s budget or on the fiscal cliff will cause an additional problem by prompting the national bond rating agencies to downgrade Louisiana again. That would not only be a black mark for the state’s fiscal reputation but will make it more expensive to sell bonds.
“If we leave without a plan, we’re basically telegraphing to anyone that we don’t intend to honor our bills next year,” Morrell said in an interview.
Also in play is whether the Legislature will attempt to lower tax rates and eliminate tax breaks – as recommended by a task force that spent 2016 studying the tax code, at the Legislature’s request, and called it “broken.”
Meanwhile, The Tax Foundation, a Washington-based group, says Louisiana has the worst-ranked sales tax system in the country because it’s so complicated and charges the highest average combined state-local rate at 10 percent.
The ball is in the court of the House Republicans because the major revenue-raising bills must begin in Ways and Means and because opposition from the committee already doomed Gov. John Bel Edwards’ major proposal to prevent the fiscal cliff, a tax on corporate sales.
Within hours of that defeat, Edwards challenged the Republican House leaders to put forth their own plan.
He has said repeatedly that the state needs more money to fix crumbling roads, meet the needs of students attending public colleges and universities and provide expanded health care for the poor and disabled.
Republican rank-and-file members report hearing a different message from their constituents, especially in legislative districts where the oil price drop has led to widespread layoffs.
“A couple of people have said they’d like us to raise revenue and expand the size of government,” said state Rep. Phillip DeVillier, R-Eunice. “But much more often I’m hearing: ‘Please do not raise taxes.’”
DeVillier, who serves on Ways and Means, said he is open to raising more revenue only by ending tax breaks.
None of the Republican leaders have a vote on Ways and Means, but their blessing normally is enough to move a bill out of the committee and onto the House floor, the next step in the legislative process.
Speaker Taylor Barras, R-New Iberia, did not respond to two interview requests on Friday. But he told The Advocate editorial board last week that GOP leadership wants to see which of the many ideas to change the state's fiscal structure, and possibly raise additional dollars, will attract support from members.
State Rep. Barry Ivey, R-Central, is sponsoring several bills that would have the effect of rewriting the tax code to impose a flat corporate and individual income tax rate while eliminating tax deductions.
“I believe it’s very likely that the core of my package will get out,” he said in an interview. “Let’s get this to the floor so we can have a conversation about them.”
State Rep. Gene Reynolds of Minden, who heads the Democratic House caucus, said state Rep. Neil Abramson, D-New Orleans, the committee chairman, told him that the committee will advance some bills but did not provide specifics.
“If we’re going to roll that penny off next year like we told everybody, we’re going to need some revenue to fill that hole,” Reynolds said. “If nothing comes out of Ways and Means, we’ll be looking at a special session.”
Besides Ivey’s, another measure that has a shot of advancing out of Ways and Means is House Bill 648 by state Rep. Kenny Havard, R-St. Francisville. It would replace the state’s corporate taxes with a tax of about 3 percent on gross profits of corporations. It would raise about $150 million next year, he said.
Republican and Democratic legislators alike are offering bills that would enact the measures recommended in January by The Task Force on Structural Changes in Budget and Tax Policy to lower tax rates coupled with eliminating many tax exemptions. Edwards supports the recommendations.
Reynolds is sponsoring one measure recommended by the task force, to extend the sales tax to a number of activities subject to taxation in Texas but not in Louisiana. But Reynolds said he will offer amendments to water down House Bill 655 in an attempt to win enough support to win the committee’s support and keep the proposal alive.
Stokes is offering House Bill 673, which would create a more uniform sales tax system and address many of The Tax Foundation’s complaints.
Lawmakers on the House tax committee quickly launched their work Tuesday on the main debate …
The committee hearings will shine a spotlight on Abramson, an oil and gas attorney who represents Uptown New Orleans and is in his third and final term in the House. Abramson got the plum chairmanship after being the only Democrat who voted in January 2016 to elect Barras as speaker over Edwards’ candidate, Democratic state Rep. Walt Leger III, whose New Orleans district is next door to Abramson's.
To the consternation of Democrats, Abramson has since repeatedly sided with Republicans. He was the only Democrat who voted for the House budget on Thursday.
Abramson has a reputation among his colleagues for telling them as little as possible of his plans beforehand. He did not respond to two interview requests on Friday.