Expected deep cuts to higher ed has Jindal administration looking to adjust tax credits _lowres

Advocate staff file photo by BILL FEIG -- Aerial of LSU showing the campanile, union and quadrangle.

The Jindal administration is looking at adjusting tax credits as a way of raising revenues to mitigate deep cuts expected to higher education and health care, the chief budget architect said late Tuesday.

Commissioner of Administration Kristy Nichols says the ideas are among those under review and that anything accepted must be “revenue neutral.” But for the first time, the administration has opened the door to tinkering with a part of the budget that had been off-limits.

Under Gov. Bobby Jindal, tax credits, exemptions and other breaks for business have mushroomed. A handful of the giveaway programs, mostly incentives to increase business activities, examined by The Advocate in a recent series found that their cost had shot up from just over $200 million to $1.1 billion during the past decade.

One idea being considered for the budget would be to take the money from tax credits that are in excess of the amount of taxes owed. For instance, if the credit is $110 but the taxpayer’s liability is $100, then the state would keep the extra $10 rather than refund the amount, she told The Advocate in an interview.

Some, but not all, tax credits must be applied against a taxpayers’ tax liability. And some of the tax exemption programs would allow for the possibility of the state taking the excess, Nichols said. Her staff is reviewing the credits to identify those, which could include credits for solar installation, alternative fuels and inventory taxes charged businesses.

The idea falls under the definition of “revenue neutral” because “it would be considered a reduction in expenditures,” Nichols said, adding “We’re looking at only above-the-tax credit,” Nichols said.

Another plan on the table would be to allow colleges and universities to raise fees on courses for occupations that are in demand, then reimburse the students or their parents with a tax credit against income taxes owed the state.

All of the tax credit ideas are in the early stages of vetting. Issues to be addressed include how much money would be raised and how fast, along with possible legal hurdles. “We’d have to take it on a case-by-case basis,” she said, adding that changes likely would need legislative approval.

Exactly which of the ideas the administration will alight on depends on any number of factors and will be revealed when the executive budget proposal is submitted on Feb. 27, Nichols said.

“Our approach to the budget is going to be very straightforward,” Nichols said. But the proposal, when complete, would increase revenues and lower the amount of one-time money used to pay for expenses that recur year in and year out.

Because of the way one-time money was used in the current year’s budget, along with a dramatic drop in the price of oil, the state expects to bring in $1.6 billion less in the coming fiscal year, which begins July 1. Gov. Bobby Jindal has said repeatedly that he would veto any tax increase. He considers rolling back tax credits and exemptions that are not offset by cuts elsewhere — revenue neutral — to be a tax increase.

State Senate President John Alario said a lot of ideas are being thrashed out by lawmakers, from those like the administration is considering to outright repeals of tax credits, which the governor would oppose.

“It depends on what the numbers look like, really,” said Alario, the Republican from Westwego who has great sway in what the final budget will look like.

“With whatever is being proposed, the first question that would have to be understood is whether this would curtail the tax credits or just delay the state’s liability,” said Robert Scott, who heads the Public Affairs Research Council of Louisiana.

PAR is a member organization that studies and proposes ideas on state government policies.

In addition to ways of raising revenue, Nichols said the administration is looking at downsizing state government into a more fiscally sustainable form. That means across-the-board cuts in funding for state services with some agencies receiving reductions of up to 15 percent, she said.

Higher education and health care services for the poor and uninsured — about one-fourth of the state’s population — are bracing for cuts of about $300 million each, on top of massive cuts in previous budgets. State spending on colleges and universities as well as the state’s portion for health care — the federal government matches state payments — is not legally protected and routinely bears the brunt when budgets are slashed.

Louisiana Higher Education Commissioner Joe Rallo said during a video chat Tuesday evening that he’s forming a list of recommendations for legislators, based on meetings with college and university leaders.

“Let me put it in perspective: We’re looking at a proposed budget cut of $420 million, and we have right now a higher education budget of about $720 million,” Rallo said. “This would basically gut higher education.”

Rallo said it will take major action to offset the proposed cuts.

“This is something that needs a major fix, not something in the range of $5, $10, or $20 million,” he said. The best plan moving forward would be to identify more permanent sources of funding that can be directed to higher education.

“We need to work with our legislative colleagues to define revenue streams for higher education,” he said.

Elizabeth Crisp and Gordon Russell contributed to this report.

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