Mission accomplished. That was how Gov. Bobby Jindal, Senate President John Alario and House Speaker Chuck Kleckley all trumpeted the conclusion of the legislative session Thursday night, which ended the state’s worst budget crisis since the late 1980s.
“We view this as a very successful session,” Jindal told reporters in his fourth-floor Capitol office. “We wanted to pass a balanced budget that protected higher education and health care, and did that without raising taxes.”
“From where we were when we began this session, $1.6 billion in the hole, higher education about to collapse, health care almost non-existent, you have done a magnificent job,” Alario told senators. “You deserve a hand.”
Applause erupted in the Senate chamber.
“We crossed the goal line with the ball,” Kleckley told House members.
But while they solved the immediate crisis, Jindal and legislators fumbled the more arduous task of putting the state’s finances on sounder footing for the coming years.
The $24.5 billion budget passed Thursday night contains so many short-term fixes that next year’s governor and Legislature will inherit a budget deficit of an estimated $1 billion, documents show, and the size of the deficit is only projected to grow in the following years.
“They put a Band-Aid on things; they didn’t heal the wound,” Jan Moller, director of the Louisiana Budget Project, said in an interview Friday. “It’s pretty clear they did little to fix the structural problems of the budget. They left the heavy lifting to the next administration.”
Indeed, all four candidates for governor — U.S. Sen. David Vitter, Lt. Gov. Jay Dardenne, Public Service Commissioner Scott Angelle and state Rep. John Bel Edwards, of Amite, the only Democrat — have said that if elected, they would hold a special legislative session shortly after taking in office in January devoted to finding a long-term solution to the budget problems that Jindal and the outgoing Legislature are leaving behind.
“I am absolutely certain that the next governor will be holding a special session in January or February to solve the structural problem,” Edwards told reporters Thursday immediately after the session ended.
The budget problems developed during Jindal’s two terms in office.
He and the Legislature that took office in 2008 inherited a budget surplus of about $1 billion from Gov. Kathleen Blanco. The Legislature, with Jindal’s approval, immediately began cutting taxes and raising spending on roads and bridges.
The downturn of the national economy hit Louisiana that year and left the state treasury with less money. Since then, Jindal and the Legislature have struggled to balance the budget each year.
They balanced revenue with spending during the current budget year by continuing to raid the state’s trust funds and resorting to other gimmicks, including a tax amnesty program that provided only a short-term windfall.
In all, the budget passed by legislators in 2014 and signed into law by Jindal contained a record $1.2 billion in one-time money, that is, money that wouldn’t be available in 2015.
After oil prices dropped late last year, legislators and Jindal had to close a $1.6 billion budget deficit when this year’s session began April 13.
After seven years of cutting taxes, Jindal and the Legislature swung the pendulum in the opposite direction in 2015 and sought to raise new revenue.
Legislators, led by state Sen. Robert Adley, R-Benton, proposed taking back hundreds of millions of tax credits and exemptions they had awarded to businesses in recent years.
For his part, Jindal proposed raising $526 million for the fiscal year that begins July 1 by scrapping the tax rebates that businesses get from the state for 12 different taxes they pay.
Legislators chose instead to shave 25 percent of the rebates that companies get from the state when they pay inventory taxes to local governments. That measure, House Bill 805, by state Rep. Bryan Adams, R-Terrytown, will raise about $111 million a year.
Among their final votes Thursday, legislators also raised revenue by increasing the cigarette tax by 50 cents to a new rate of 86 cents per pack, trimming a number of business breaks and limiting the amount of money taxpayers can spend every year in subsidies for the solar energy and film and television industries.
Adding in a $50 increase in the vehicle title fee to $68.50, the state will raise about $750 million in new money next year.
Jindal, though, is claiming it isn’t a net tax increase following passage of the SAVE fund. Under this measure, no students will pay a higher fee, no one will pay lower taxes and higher education institutions will get no extra money.
But the tax credit included in the plan allows Jindal to claim that it offsets all of the new tax revenue, under rules promulgated by Americans for Tax Reform, a national anti-tax organization headed by Grover Norquist, an influential conservative.
Smokers and many business executives will undoubtedly disagree with Jindal and Norquist.
“To me, it’s a tax increase if I have to pay a tax tomorrow that I’m not paying today,” said Gregory Bowser, a lobbyist for the Louisiana Chemical Association, whose members will pay more in taxes next year.
A June 9 report by the Legislative Fiscal Office several days before the budget was approved said that it included $509 million in one-time money — by drawing down more money from trust funds, from the final year of the tax amnesty program and through a one-year plan to reimpose a one-cent sales tax on businesses’ utility bills.
The $509 million figure grew to nearly $600 million during the final votes Thursday, although it’s not clear that legislators realized this as they approved the measures with little discussion of the details.
Legislators got $7 million for next year only by suspending the program that allows filmmakers to sell their tax credits back to the state for 85 cents on the dollar.
The Legislature found another $73 million in trust funds for the budget. Of that amount, $20 million would come from unclaimed lottery winnings and another $25 million from the state’s Medicaid Assistance Trust Fund.
It’s not clear that the Medicaid trust fund money will materialize. The fund has a $1.3 million balance, according to the state treasury’s office, and it last had at least $25 million three years ago.
The Department of Health and Hospitals plans to replenish the fund in the upcoming fiscal year through provider fees to make the $25 million available for spending, said Olivia Watkins, an agency spokeswoman.
Legislators agreed to another short-term deal less than 24 hours before the legislative session ended when they decided to “sunset” six measures that will impose a higher tax burden on businesses. The six measures will raise an estimated $260 million but will be off the books in three years, to appease powerful business interests.
Those measures are: House Bill 629, which reduces certain business tax credits by 28 percent; House Bill 624, which reduces certain business tax exclusions and deductions by 20 percent; House Bill 635, which reduces certain business tax rebates by 20 percent; House Bill 829, which shaves the film tax credit; House Bill 402, which reduces tax breaks for taxes paid in other states; and House Bill 218, which limits certain business tax deductions.
The state is likely to spend more money than projected in two areas.
In an issue that has received little attention, the undersecretary for the Department of Health and Hospitals told lawmakers March 27 that the budget did 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.
Meanwhile, the Public Affairs Research Council of Louisiana has questioned whether $145 million in projected savings from an outside consulting firm’s recommendations to the Jindal administration — the Government Efficiencies Management Support — will actually materialize next year.
Robert Travis Scott, PAR’s president, praised legislators’ willingness to closely examine the $7 billion in tax breaks added to the tax code over the years.
But, he said, “From Day 1, the next governor will be facing another crisis in the budget and will be under the expectation by just about everyone that he will fix the long-term fiscal sustainability problems.”
Follow Tyler Bridges on Twitter @TegBridges. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/.