The following is a partial transcript of Gov. John Bel Edwards' meeting with The Advocate editorial board and Capitol bureau on Monday, April 10. The hour-long meeting has been lightly edited for content and clarity.
In attendance from The Advocate were: President and Publisher Dan Shea; executive editor Peter Kovacs; managing editor Fred Kalmbach; editorial page editor Danny Heitman; columnists Stephanie Grace and Lanny Keller; Capitol bureau reporters Elizabeth Crisp, Mark Ballard, Will Sentell and Tyler Bridges; and photographer Bill Feig.
From the Edwards administration: Department of Revenue Secretary Kimberly Robinson, special counsel Erin Monroe Wesley and communications director Richard Carbo.
EDWARDS: I’m glad we have an opportunity to visit. I don’t know that I have a whole lot to add on top of the 38 minute-talk I gave an hour ago. Y’all probably were paying attention to that but I think it pretty well sums up the challenges that we’re facing right now with respect to this session.
What’s lost on a lot of people is the cliff is July 1, 2018 and that’s primarily the penny falling off – that’s $880 million by itself. But you all may remember that in 2015 what we did to certain tax credits and rebates and programs where we gave them a hair cut where instead of being worth 100 cents on the dollar, they were 80 cents or 72 cents on the dollar. All of that got sunsetted so that on July 1, 2018, those go back to being 100-cents on the dollar.
With that and a couple of smaller things, you end up with $1.3 billion cliff on July 1, 2018. While it’s more than a year away, this is the last fiscal session between now and then. Obviously, if we don’t address the issue, we would have to come back into a special session in order to do that.
The point I'm trying to make, the overarching point I was trying to make is that there won’t be anything to consider this fall or next spring that is any more appetizing than the choice we have right now. I think we ought to go ahead and confront our challenges head on and fix these problems. It would also inspire some confidence in the credit rating agencies. As y’all know S&P recently downgraded us. We’ve been on negative watch for about a year but just looking at the cliff and looking at how temporary a lot of the measures were. They’re looking for us to do some long-term structural reform, and hopefully with benefit of the task force report we can do that.
It is hard. I’m asking people to do things that are not pleasant. Cuts to the degree that we require in the absence of reforming our tax structure, those are hard too and there hasn’t been an appetite for those kind of cuts either.
Hopefully we can come together and fix our problems. I genuinely believe can. I think the most challenging thing is creating that sense of urgency. Because people are looking at that cliff that’s more than 12 months away.
If there’s anything I learned in this office over the last 14 months in this office, it’s not until you get to a point in time where you feel that sense of urgency, right up against the deadline that people’s minds get focused and do what’s hard. Hopefully, we won’t have to that this time.
Of course, there are some other critically important things like criminal justice reform and other measures that I outlined today that we can certainly talk about.
Today, we stood up the housing recovery program where, I think, right at or more than 4,000 individuals have actually signed up for the survey today, the first day that the survey has been available. That's a promising sign. We've got 56 people working in a call center helping to make that happen. They are also doing that online. This is the first step toward determining eligibility for this specific homeowner piece we are doing.
ADVOCATE: When do you think the first grants will be going out for homeowners? If I was one of those 4,000 today, what is the timeline here?
[At the time of the meeting, the state had not received word from the federal government that it had been granted access to the line of credit. The governor's office received the news shortly after The Advocate meeting ended, which alters the timeline. Read more about that here.]
JBE: You got to make sure that you’re dealing with people who are eligible under the action plan that we’ve submitted that has been approved by HUD. And, of course, we have not just the folks at HUD, but we've got the Office of Inspector General dealing with this, we’ve got the Legislative Auditor involved from our end, just trying to make sure we get things right. The last thing we want to do is make a mistake and have to claw back the money. But it wasn’t until this past Tuesday when the federal government actually became obligated on the funds. We’re in a much better place now than we were then, because anything you do before there’s an obligation on the funding, you're doing at your own risk in terms if you run out with the program too early or start spending and something happens. It would all be at the state's risk. In any event, we feel very, very good now that the money is coming.
We don’t feel good about the amount of money we have. We know that, for example, HUD agrees with us that just on the housing piece alone there’s an unmet need of an additional $1 billion. They agree with those numbers. We’re going to continue to work to get that. That doesn't include any money for infrastructure enhancements which have that in recent times, when you have disaster recovery assistance like this, there is always have infrastructure enhancement part through CBDG to protect the investment you are making. So that you reduce the risk that the houses you are repairing won’t flood again. That is on top of the billion dollars. Plus any lost business losses that we would want to compensate for through the CDBG program. The total unmet need we figure is around $2 billion.
One of the challenges that we have is that Congress hasn’t appropriated money in a budget in a long time. They use continuing resolutions, which are not designed to fund anything in full and disaster recovery funding is no exception to that.
By the end of this month, we should have the next iteration of a continuing resolution that we hope to have a substantial amount of money.
We've had some very good meetings wiht members in Congress, both in the House and Senate. Members of Appropriations but also the staff and also with Mick Mulvaney, at the Office of Management and Budget. We're hoping that we will do well with that.
ADV: Who is your go-to person [member of Louisiana delegation] in Washington, D.C.?
JBE: To be very honest with you, we've worked with every member of the delegation and their staffs in everything we've ever requested from either the Obama administration, through his OMB or HUD or FEMA. We copied every member of the (delegation) on. We call and talk with them and meet with them frequently; and that's happened after the election, as well.
For the most part, it's been a very good working relationship. In terms of understanding what the need is and making sure we are all requesting the same assistance, there really hasn't been a big division there at all.
Certain people, by virtue of where they sit on committees, are able to do more than others. For example, he is not now, but Sen. Cassidy was on Appropriations. Now Sen. Kennedy is. He and I met last week, last Thursday afternoon, in his office in Washington. I've enjoyed that working relationship. He and I have actually taken meetings together at HUD. We have a common approach to HUD about some of the things that we've needed.
The members of the House, likewise, obviously Garret and I have had some difficulty here lately, but quite frankly I just can't understand where that comes from and hopefully it won't last because I don't think the constituents are benefitting from it.
ADV: What do you think the House Oversight hearing was all about?
JBE: Ostensibly, it was to conduct oversight into FEMA's response, to include the Shelter at Home program. It obviously turned into much more than that, where you saw members of the committee from other states who were obviously given information, much of it was totally false. Even going back to the forecast from the National Weather Service before the event ever happened. The remarks were just demonstrably false about what the forecast was and whether it went up on GOHSEP's website and people were adequately warned. All sorts of things. It appeared to me as someone in the room that it was just a politically orchestrated show. That's unfortunate because there are real issues that need to be resolved, like the duplication of benefits problem, like the fact that you don't really have a good housing solution right now for the short term.
I was not terribly surprised because that's the way Congress operates, but I was disappointed.
ADV: Getting into the budget, could you walk us through the logic that led you away from a consensus task force tax plan to a tax plan that people hadn't heard of until you introduced it.
JBE: First of all, there is an awful lot in the plan that I've got that comes straight from the task force. The task force report, if you could sum it up, it seems to call for broadening the base and lowering the rates. And we're doing that on the sales tax, on the individual income tax and on the corporate income tax. It talks about expanding the sales tax to services, that's part of our plan, as well. It talks about making sure that we're not spending more money than we should on tax credits, rebates and other incentives, given that some of them have a poor return on investment. Many of the aspects are very similar.
The Louisiana Legislature kicked off its regular legislative session on Monday like it frequ…
But as I was talking, and I made a point to do this before, during and after the special session we had earlier this year, I talked to many, many members -- Republican and Democrat -- who just indicated to me that the portion of the task force report dealing with individual income tax, in terms of picking up revenue there, it was just off the table for them. They weren't going to go there because they believe that individuals are doing enough and corporations are not. I could easily, and I said it today, support an approach that doesn't deviate at all from the task force. I think it's going to be extremely difficult to get that through, and at the end of the day, I'm trying to fix the problem. And we do have a very serious problem. And it is true that we have far too many profitable corporations in Louisiana who are not paying. I know that's unpleasant for people to hear, but it's just a fact 80,000 out of 100,000 C-Corps paying no state income tax.
Some of the most profitable corporations in the state of Louisiana, by the way.
ADV: Are you a supporter of the Morrell measure regarding the film tax credit proposal and are you a supporter of the film tax credit program?
JBE: I do support the program at a reduced level. At $180 million a year, which is the cap we put on it a couple of years ago, that cap will save $31 million next year. It's going to save $31 million. We've also made within the program, Sen. Morrell's bill is going to make significant changes to try to make sure there is an increased return on investment, that we are creating more permanent jobs in Louisiana, for example, that we are creating a real infrastructure in Louisiana in this industry. The per project cap is going to move from $30 million to $20 million so that you don't have just a few projects that eat up all of it. Slowly moving from a back-end cap to a front-end cap. You put the back-end cap in a couple of years ago because you had to save money right away, but that means you've certified credits that you don't intend to pay. That's problematic.
Transitioning from the back-end cap to the front-end cap, I think, is smart.
It is a program that I believe has a lot of merit to it. I understand that there are some concerns, but all of the changes we've made over the last several years have been trying to address those concerns and make sure we do better in terms of the return on investment.
There is a return on investment that is really good for locals, because the credit is paid by the state. That's one of the things that makes it very difficult.
ADV: On transportation (gas tax), do you plan to endorse a specific bill?
JBE: I will support any legislation that hits that desk over there that is consistent with the task force's report.
One of the things I think we have to do is restore the purchasing power of the gas tax. It's lost 56 percent of its purchasing power since 2009. It isn't that difficult to figure out what you have to do to increase the gas tax to get that back. Anything in that order of magnitude, I think is responsive. But I hope that something I said today isn't lost on people. We don't have excess state general fund dollars right now, but if we don't move $40 million from the general fund to the Transportation Trust Fund, we won't be able to draw down $200 million from the federal Transportation Trust Fund. Think about that.
Our state Transportation Trust Fund, at a minimum, should be sufficient to draw down our federal tax dollars. That is not the case anymore. That's how much our purchasing power on the gas tax has eroded. That's before we get to any of President Trump's $1 trillion infrastructure initiative.
I have to assume that something's going to come out of that. It's going to require some non-federal match, and, in fact, we've been told it could be up to 50 percent.
I happen to think that price would make the program out of reach for most states and a state like Louisiana, you can't do it strictly through public-private partnerships and tax credits because our corridors are not sufficient in terms of the volume of traffic to make that work. But at the end of the day, there is an infrastructure package that's coming from the federal government that's going to require non-federal match and we don't have the ability to draw down the existing trust fund dollars.
We have places in Louisiana where traffic is at a stand-still. It's 4 p.m., I open that door right now and we can take a look at the bridge and I promise you traffic is not moving.
ADV: Is it essential, or is it desirable, that the public should have to vote on a gasoline tax?
JBE: I don't know that it's either. It's a clunky way.
You put projects in the constitution and then they have to be done even if 10 years later you wouldn't choose to do them because things have changed, but you have to do them just as they are in the constitution.
I don't think it's the best way to do it. I guess if it would be necessary to get the two-thirds vote, but at that point in time, you have a set list of projects that will be funded through the increase in the gas taxes. I just believe that it's probably a better approach not to do something like that in the constitution. That's one of the reasons our state constitution looks the way it does.
At the end of the day, (if) the only way to get a two-thirds vote would be to put it into the constitution, that wouldn't be ideal to me, but that is better than not addressing the problem at all.
ADV: Would it help if you articulated that you are not in favor of extending the sales tax (past its July 1, 2018 sunset)? That you will not call a special session that would include that?
JBE: I have said clearly, and did again today, that that 5th penny is scheduled by the legislation that levied it to fall off on July 1, 2018. Like the task force, I support that 5th penny going away. I hated asking for it. It's a regressive tax. It goes against my nature. But we had more than $1 billion shortfall to close out the year on June 30, and a more than $2 billion shortfall in the current fiscal year. It was the only mechanism that we had to raise as much money as we needed to raise as quickly as we needed to raise it. I do support letting it fall off.
[Cross talk clarifying question specifically on any future special session call.]
JBE: I did mention again today that if we don't fix it, because this is the last fiscal session before the cliff, that a special session will be required. Everybody understands that the call will come from me. I don't guess that I've said 'By the way...'
First of all, I don't know that I've gotten to a place in my mind where I've drawn that line.
I want it to fall off. It needs to fall off. And we're going to work this session to replace that revenue. But that's what is so difficult because that is a very big number. The other things we are doing are really, really important, but they don't get you where you need to go in terms of sales taxes on services.
ADV: What do you think is going on with the Republican Party, that they don't seem to come back with their own plan? To say, 'No, Governor, this is the Republican way of doing things'?
JBE: It disappoints me because every challenge that we face, I'm assured that they are going to have their own plan; that they are doing their own studies; that they would take the task force's report and see what they could agree to and what they couldn't. And that they would propose in the alternative.
It is the case over and over again that they ultimately decide, it's just easier, don't come up with your own plan, just vote against the one Edwards puts on the table.
At the end of the day, they haven't actually voted for cuts that I didn't put on the table first. Go back and look at it. Almost none.
There's all this talk about 'We're going to do a cuts approach.' 'Edwards is a tax-and-spend liberal.' 'We're going to reduce the size of government.'
Well, they don't do that either. We've made plenty of cuts since I've been governor.
ADV: Why do you think that? The federal government and in other states they do come up with things they want to cut. What is it about the Louisiana Republican majority in the Legislature?
JBE: I would be more specific than that. It's really the House; it's not the Legislature.
I wish I really knew. Because, to a person, I like them. I established good working relationships with many of them when I was in the House. Some of them are new, and I've gotten to know them as governor.
I don't know. I can't understand how they think they are being serious, responsible legislators. I said it today, I can respect somebody who votes no on revenue, but then endorse the cuts. Stand behind them. They won't do it.
ADV: Could you tell us a bit more about the Commercial Activities Tax? When you first introduced it, you said more specific details would be revealed later. Are you still working on the specifics and addressing concerns?
JBE: We're still working on a couple of aspects of it, although we've got it pretty much in the condition we want it in, in terms of what we are trying to accomplish. But we're going to take the first week, 10 days, maybe two weeks of session to continue to work with legislators to make sure that they understand the concept and how it would work. That once they do and they voice concerns, that we have an opportunity to try to address those concerns.
We want something that works, and we can't pass something that people don't understand.
We are continuing to work with them and Kimberly is doing a great job with that and meeting with legislators.
It's not that novel of a concept around the country. I will tell you, the way we settled in on this, it's more in the nature of an alternative minimum tax because corporations can still pay the corporate income tax, less whatever benefits they get from credits, exemptions and reductions, if it's higher. They can also pay the minimum activities tax if that's where they shake out.
We are trying to restore fairness. It truly isn't fair for that administrative assistant to pay more in income taxes to the state than that very profitable corporation that she works for.
The Louisiana Legislature on Monday begins its 168th regular session since statehood facing …
ADV: Has there been anything specifically that has been brought to your attention about [the CAT] that you are still trying to address?
JBE: Kimberly has continued to work on that. She can answer this question better than I can. We are looking at formulas in which we can make sure that the system is fair.
JBE: I do hope that y'all don't relegate the criminal justice reform. You haven't asked questions about it, but it is so important for our state.
ADV: I was waiting for the tax part to be through. [Laughs]
JBE: It's so important for our state, and we're not trying risky strategies for the first time. We are modeling our approach off of what other Southern conservative states have done successful to reduce the incarceration rate, save money and enhance public safety all at the same time. You can't do that if you don't re-invest most of the savings, however, because there are structural barriers keeping individuals from being successful when they leave prison. 95 percent of the people who go into prison are going to get out. To the extent to which you can educate them, give them a skill, deal with mental illness or substance abuse disorder, when they get out they are going to be successful and there will be less victims of crime and there will be a chance to save money.
It just makes sense for all the right reasons to say we are going to focus on non-violent offenders, those property crime offenders and those low-level drug offenders, and that's where we can make the biggest difference. It's obviously the largest effort in criminal justice reform that we've undertaken in Louisiana.
There are so many people -- the religious right, the religious left, the business community -- I know it's not without opposition in terms of some parts of it. But most of the package is relatively unanimous.
We need to get to the part where there is disagreement and bridge the divide.
ADV: Where do you stand on the abolition of the death penalty?
JBE: You know I don’t. It’s not something that the task force has put out there for consideration. I have heard some rumblings that there’s a little more discussion about it now as there has been in other states. I acknowledge that it costs a lot in terms of the criminal justice system to have the death penalty from what I understand the indigent defenders could take $10 million right away and put it towards other types of cases that make up the overwhelming majority of their caseload but I am not endorsing moving away from the death penalty in Louisiana. I am sort of interested to see how the conversation goes and who really plays a part in that.
ADV: So would you veto legislation that would overturn the death penalty?
JBE: I’m not going to commit to that either. It’s not part of my package. It's not part of the criminal justice reinforcement task force work. It's the work of some individual legislators and I'm going to see what the legislative will is.
ADV: The state punished an employee who worked on Burl Cain's home. The Corrections Secretary has similarly had people working on his home. Is it appropriate for the state to punish the subordinates for working on the homes of their bosses?
JBE: To be very honest with you, I'm not familiar enough with the particular facts to give a response to that particular question -- as to what prompted that. I'll try to figure it out. I'll try to get that for you. [He called over to spokesman Richard Carbo to look into it.] Was he working there while he was supposed to be at his job?
ADV: Yeah, and nothing happens to the big shots.
JBE: I don't know. I mean, Burl Cain doesn't work there anymore.
ADV: Do you think given the number of problems that have been uncovered at the Department of Corrections... I guess my question is, why do you have confidence in the secretary of corrections and his ability to effectively manage the agency?
JBE: The revelations that have surfaced, a lot of them have come through processes that he has in place. No. 2, he is leading the criminal justice reinvestment task force. He's been a major player in that.
I will tell you, I've known Jimmy for many years, not just since I've been governor, and I know that he has been leading an agency through a very challenging period where the state support for the dept of corrections has been chipped away at year, after year, after year. I think that under all of the circumstances, Jimmy is performing very well. I acknowledge that there has been some bad actors. Quite honestly, I don't see that reaching all the way to Jimmy. If I did, I wouldn't have the confidence in him that I do.
ADV: Do you have any reason to be more optimistic about minimum wage and gender pay gap legislation that you also supported last year?
JBE: I'm always optimistic. I think we have a much better shot at meaningful legislation this year to address the gender gap than we did last year. I see a much more cohesive effort, a broader effort.
There was a lot of work last year -- a bill actually got out of the Senate that had a huge vote in its favor. I don't want to pass a bill for the sake of saying we passed a bill. I want it to actually make a difference. I think we can do that this year. It's not easy in that is terribly frustrating to me; 90 percent of the people out there believe it's an issue that we need to fix.
We've got to be able to do better, and I think we can.
The minimum wage is extremely popular across the state and by all groups.
If you just look at other states, a lot of times they vote to raise the minimum wage and at the same time they have been voting for very conservative Republican governors and United States Senators. $8.50 over two years is a very modest, but what I believe is a very meaningful increase for the people of Louisiana that I think will do a lot of good. I don't understand the opposition to that. I don't know that it's principled or that it can be well articulated that in why 2017 someone ought to be working for seven dollars and a quarter an hour.
Note: The meeting ended after approximately one hour.