State lawmakers and Gov. Bobby Jindal are moving to adopt a budget with so many short-term fixes that they will dump Louisiana’s fiscal crisis into the hands of the next governor and Legislature.
The governor and legislators elected in the fall are likely to face a $1 billion budget hole when they take office in January because of the one-year patches in the budget that legislators are proceeding to approve now.
“We have reduced some tax credits, rebates and exemptions,” House Speaker Chuck Kleckley, R-Lake Charles, said in an interview. “But I clearly believe that the next governor and Legislature will have challenges to face. There’s not enough time to do everything we need to do.”
“We never said we thought we could solve the whole state’s financial problems this session,” Senate President John Alario, R-Westwego, said in a separate interview. “We’re hoping that debate will go on during the gubernatorial election and those folks will be prepared when they take office to come in with a new Legislature to solve the long-term financial problems.”
The new governor and Legislature seem likely to inherit budget deficits of at least $1 billion not just next year but as far as the eye can see. That would represent some progress, though, because lawmakers are facing a $1.6 billion budget deficit next year and even bigger deficits in future years.
To state Sen. Karen Carter Peterson, the prospect of big budget deficits means that Jindal and legislators have not done their job.
“The governor has been absent,” said Peterson, D-New Orleans, referring to reports that Jindal has been outside of Louisiana nearly one out of two days in recent months and rarely meets with legislators when he is in Louisiana. “The Legislature has had opportunities on its own to come up with solutions. We’ve known that we had major fiscal problems. Not solving the problem this year is an abdication of our responsibilities.”
Peterson’s comments could be dismissed as partisan because she chairs the Louisiana Democratic Party, and Jindal and the legislative leaders are Republicans. But she was the only senator in 2013 and again in 2014 who voted against the budget, and when she did so, she expressed concerns that the budgets were not ending the chronic deficits that have developed during Jindal’s term.
Jindal inherited a $1 billion million surplus from Gov. Kathleen Blanco when he took office in 2008. Since then, Jindal and the Legislature have eliminated some 30,000 government jobs, principally by turning the state’s hospitals over to private management, and deeply cut state aid for public colleges and universities — the deepest cuts of any state during that time, according to a recent study.
Jindal and the Legislature also have cut taxes for higher-income taxpayers and approved numerous tax breaks for businesses. Economic growth has not improved tax collections enough to offset the lost tax revenue.
Tax collections dropped from $8.1 billion in 2009 to $7.4 billion last year, while exemptions from taxes rose from $7.1 billion in 2009 to $7.6 billion in 2014, according to the state Department of Revenue.
By law, the Legislature must approve a balanced budget every year. Jindal is threatening to veto the budget that lawmakers are drafting if the tax measures included in it do not have offsetting tax decreases.
Jindal and lawmakers have balanced the budget in name only in recent years by drawing down various reserve accounts, selling state property, tapping legal settlements and approving a tax amnesty program. The budget that legislators approved last year contained $1.2 billion in one-time money that would not be available this year.
That huge use of one-time money combined with the drop in oil taxes produced the $1.6 billion projected deficit that lawmakers have been grappling with this year. They have until June 11 to approve a budget for the fiscal year that begins on July 1.
“I’m still optimistic that we’ll be able to get to the end of the session with a balanced budget that doesn’t raise taxes and invests in higher education and health care,” Jindal told reporters Thursday.
It’s already clear that the budget will be balanced with one-year fixes for ongoing expenses — at least $524 million of them, according to a May 25 report from the Legislative Fiscal Office.
“I think it will be duct-taped, and I doubt it will be truly balanced,” said state Treasurer John Kennedy, a Republican who is often at odds with Jindal on spending matters.
The $524 million in one-time fixes includes $50 million from the tax amnesty program that is ending; $124 million from a one-year paydown in debt service that won’t be available next year; $42 million in disaster relief money for higher education and health care programs that won’t be available next year; and $103 million through a one-year suspension of tax breaks for business that the House has approved and that is awaiting Senate approval.
“Nothing on the table permanently fixes the structural gap,” said Greg Albrecht, the Fiscal Office’s chief economist.
The House has closed part of the deficit for next year and future years by approving measures that would generate $615 million in new revenue. That money would come from a 32-cent increase in the cigarette tax, a rollback in business tax breaks and a trimming of tax subsidies for the film and solar energy industries.
Legislators also are cutting hundreds of millions of dollars in state spending to close the $1.6 billion projected deficit for next year.
After being approved by the House, the budget is now before the Senate Finance Committee.
Kristy Nichols, Jindal’s chief budget adviser, told that committee Monday that the budget still faces a $163 million shortfall in funding critical services, including money for the private companies that manage the public hospitals and so-called legacy costs from the privatizations that will be borne by the LSU medical schools in Shreveport and New Orleans.
Asked Thursday where the Senate would get the $163 million, Alario replied, “I don’t know.”
The shortfall is actually bigger.
In an issue that has received little attention, a spokesman for the Department of Health and Hospitals told lawmakers March 27 that the budget does not contain $150 million in state aid for the Bayou Health program, the so-called Medicare D program and several other health programs — money that the agency will inevitably have to spend.
DHH will begin to need the $150 million as early as October, setting up the likelihood of midyear budget cuts.
Legislators also are awarding more tax credits that will cost the state treasury.
House Bill 828, approved by the House on Thursday, phases out the corporate franchise tax at a cost of $36.5 million next year and $912 million over a five-year period. The vote was 69-33, with only two Republicans voting against it.
State Rep. Cameron Henry, R-Metairie, the bill’s sponsor, said it would send an important signal to businesses that Louisiana remains a friendly place to invest, in light of the other measures trimming business tax breaks.
House Bill 207, also approved Thursday, measure would extend the 4 percent exemption on the sale of food for home consumption to food purchased for home consumption at bakeries. Under one estimate, the measure would cost the state $4.2 million next year. The sponsor is state Rep. Lance Harris, R-Alexandria, who made a name for himself earlier in the session by decrying the cost of tax breaks to the state treasury. House members approved the measure on a 93-1 vote.
On Tuesday, the House also approved an extension of the tax break that investors get for renovating historic property, at a cost of $45 million beginning in 2019. That measure is House Bill 387, and it was approved 72-24, with Republicans providing most of the “no” votes.
State Rep. Jim Fannin cast one of the “no” votes on the historic renovations tax credit. Giving $45 million to these investors is $45 million that can’t be spent on colleges and universities, health care or other state programs, Fannin said in an interview.
“You’ve heard my concern every day on the floor that we’re still giving credits for the future,” said Fannin, R-Jonesboro, who chairs the House Budget Committee. “One of the reasons I’m saying we can’t afford to do that is we still have a structural problem with the budget. Can you afford them in lieu of higher education and health care needs?” Fannin did vote to phase out the corporate franchise tax.
The sponsor of the historic tax credit extension is state Rep. Walt Leger, D-New Orleans.
“I certainly recognize we have budget challenges going forward,” Leger said in an interview. “But granting successful tax credits is not going in the wrong direction. Some of them work, and some of them don’t. The long-term fixes will come with the next governor.”
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.