The Louisiana Legislature ended a two-month drama Thursday — the final day of the 2015 legislative session — by approving a $24 billion budget that takes effect July 1.
In a vote 90 minutes before the 6 p.m. adjournment, legislators also passed a much-maligned tax credit known as the SAVE fund that led Gov. Bobby Jindal afterward to say he would sign the budget and tax measures into law.
The governor told reporters in his fourth-floor Capitol office that legislators had passed a balanced budget that did not include a net tax increase, thanks to the SAVE fund.
Legislators said final approval of the budget will mean full funding for the state hospitals now under private management around the state — including the New Orleans hospital that opens in August — and will give Louisiana’s colleges and universities nearly as much money as they sought. The higher education institutions had been threatened with deep budget cuts since the session began on April 13.
Thursday votes closed a $1.6 billion projected budget deficit — at least on paper — and ended the state’s biggest budget crisis since the late 1980s. But it will take at least a day of sorting through Thursday’s final budget and tax votes to determine exactly to what extent legislators solved the problem.
House members rushed through a series of bills during the final hour of session, with little explanation, even as members hugged and said their goodbyes. Lawmakers voted to approve the budget – 80-19 in the House and 37-2 in the Senate – without a detailed explanation of what it contained.
The budget is full of one-year fixes that will lead to problems next year, as legislators cut spending, scaled back business tax subsidies and raised the state cigarette tax. In all, the Legislature raised about $720 million in new revenue for next year, but most of the tax measures will last for only one or three years, to satisfy demands from powerful business lobbies.
In passing the budget, legislators from the House and Senate settled disputes on the final day by increasing cigarette taxes by 50 cents per pack, providing extra money for K-12 public schools and taking some $70 million from various state reserve funds.
Passage of the SAVE fund was crucial because Jindal was virtually certain to veto the budget and the tax measures that would fund it if the Legislature hadn’t approved the measure, which was contained in Senate Bill 93.
It was approved on a 59-44 vote after supporters cut off debate. Republicans provided nearly all of the “yes” votes. The Senate vote was 30-9.
The SAVE plan will impose a fee of almost $1,600 per student that the students won’t actually pay because the plan also will create tax credits — phantom tax credits in the eyes of critics – that will offset the fee. The tax credits in turn will allow Jindal to offset all of the tax measures approved by legislators, Tim Barfield, the governor’s revenue secretary, said after the session ended.
Jindal does not need tax offsets for all of the revenue raisers approved by the Legislature under complicated guidelines that he is following from Grover Norquist’s Americans for Tax Reform, a Washington, D.C.-based anti-tax group.
Jindal has proudly maintained a steadfast anti-tax record as governor.
The SAVE fund will not actually make students pay any more because of the tax credit, and it will not mean more money for universities and colleges.
The 50-cent increase in cigarette taxes contained in House Bill 119 was the midway point between what the House and Senate had been proposing. The 50-cent increase will give Louisiana an 86-cent cigarette tax, the country’s 35th-highest rate. Louisiana currently has a 36-cent cigarette tax, the country’s 48th-highest.
With the approval of HB119, the Legislature also imposed a new tax on electronic cigarettes.
In all, the tobacco tax increases will raise $108 million next year.
“It’s not as good as I hoped, but we’ve never had such a good increase,” said state Rep. Harold Ritchie, D-Bogalusa, a smoker for 50 years who originally had sought a $1.54 tax increase.
Another issue in dispute was whether to eliminate 1 cent or more of the 4-cent sales and use tax break that businesses get on their utility bills. House leaders wanted to take away 3 cents, but the Senate held fast at taking away only 1 cent. This would raise $103 million but only next year under House Concurrent Resolution 8.
Senate leaders agreed to the demand by the House that the final budget include a $50 million increase in funding for K-12 public schools above last year — $38 million more than what the Senate wanted.
The Legislature on Thursday approved a $50 increase in vehicle title fees to $68.50. It was House Bill 445, and it will raise $59 million next year.
Six of the measures that will raise money next year by taking away business tax breaks will expire after three years.
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 breaks).
The Legislature also decided to take $53 million from various trust funds, including the Medical Assistance Trust Fund, and another $20 million from unclaimed lottery proceeds.
Another issue resolved Thursday will establish a $180 million cap on the state’s film tax credit for the next three years and direct more of the benefits to Louisiana-based filmmakers. The controversial program is expected to cost taxpayers about $250 million this year, so a $180 million cap will save the state about $70 million.
The Legislature will raise another $7 million next year by suspending for one year the provision that allows filmmakers to sell their tax credits back to the state for 85 cents on the dollar.
At stake Thursday was state spending for hundreds of public institutions and programs, including LSU, Southern University, the University of New Orleans, Baton Rouge Community College, the soon-to-open New Orleans hospital, Our Lady of the Lake Regional Medical Center, Lafayette General Hospital, health insurance for 56,000 working poor people in New Orleans and the LSU medical schools in Shreveport and New Orleans.
The biggest question Thursday was whether the House would approve the SAVE fund, which had strong Senate support.
State Rep. Chris Broadwater, R-Hammond, asked his colleagues to approve the measure even as he acknowledged that the vote was an “embarrassment” and that critics have called it “a gimmick” and “a sham.”
“Our love for higher education is greater than the embarrassment over the instrument,” Broadwater said, arguing that vetoes by the governor would cost higher education institutions about 25 percent of their money next year, unless the Legislature voted to override the governor next month.
A Jindal veto would have forced legislators to try to override him at a special veto session that would begin on July 21.
Thursday’s approval of the budget took place two weeks before Jindal’s June 24 expected announcement for a presidential run in Kenner. The governor is scheduled to waste little time in resuming his out-of-state campaigning with the Legislature out of town. He will travel to South Carolina on Friday and Saturday and to Iowa on Monday, according to published reports.
Jindal praised legislators for passing the SAVE plan, saying, “At the end of the day, I’m proud of this legislation.”
Besides Broadwater, others who supported the SAVE plan had little good to say about it.
“Many members held their noses and voted for it,” Rep. Thomas Carmody, R-Shreveport, said in an interview, and then referred to Jindal. “It’s for one person’s (presidential) politics. Period. But the governor said he would veto the budget without it.”
Given the threatened budget cuts, several higher education leaders came to the Capitol on Thursday to lobby for SAVE, including F. King Alexander, LSU’s president and chancellor; Monty Sullivan, chancellor of the Louisiana Community and Technical College System; Sandra Woodley, president of the University of Louisiana System; and Roy O. Martin, an Alexandria businessman who chairs the Board of Regents, which oversees higher education in Louisiana.
Legislators began the legislative session facing the massive budget deficit for the July 1 fiscal year in what veteran observers of state government called the worst budget crisis since the oil bust in the late 1980s, when Gov. Buddy Roemer inherited a nearly bankrupt government from Gov. Edwin Edwards. Then, the big drop in crude prices left the oil-dependent state treasury with a cash shortfall.
This year’s budget crisis was largely self-inflicted. Jindal and state legislators cut taxes and agreed to patchwork financing in previous years that would not be available the following year, in part by draining nearly all of the state’s reserve funds. Last year’s budget had a record $1.2 billion in one-time money that was not available this year.
Follow Tyler Bridges on Twitter, @TegBridges.