Baton Rouge Republican Rep. Paula Davis looked at her colleagues collecting their belongings at the end of the day and noted that while last week was busy, no single issue has dominated the session.
Previous sessions focused on the budget deficit, agreed Jack McFarland, a Jonesboro Republican. This year the state has more than enough money to pay the bills.
One of the older hands sarcastically welcomed Davis and McFarland to their first do-nothing, pre-election session. McFarland laughed. All the legislators stand for election in October and they’re not leaning into issues that may come back to haunt them on the campaign trail.
But Davis and McFarland are keeping an eye on several bills aimed at rolling back the .45 percent sales tax increase that ended last year’s legislative stalemate — a deal that Davis sponsored as House Bill 10 and on which McFarland served as a chief negotiator.
Had the penny legislators added in 2016, making the state sales tax 5 cents, expired on July 1, 2018 as planned, lawmakers would have faced dramatic cuts to balance the budget. Their compromise was roughly half way between the hardened positions of House Republicans and the Democratic administration. It set, for the next six years, the state sales tax at 4.45 cents on every dollar and suspended more than 100 exemptions to cover the $466 million shortfall between available money and promised services.
But Davis and McFarland worry this year’s efforts, if approved, to roll back parts of the deal could throw the state back into the cycle of deficits.
“My first question is how do you make up that money?” Davis asked. “I can’t vote to undo if we don’t have a plan to replace that money.”
Last week started with Senate Bill 21, which would have gradually diverted the deal’s proceeds to road projects but would have left the state general fund, which pays the bills, an estimated $392 million short. It was the Democratic members of the Senate Revenue & Fiscal Affairs committee who kept SB21 from progressing.
“If we start willy-nilly, everybody starts coming up with ideas with how we spend money that we fixed just a little less than a year ago we’ll be right back at another fiscal cliff,” said Sen. Gerald Boudreaux, D-Lafayette, during the hearing.
Rev & Fisc will soon be considering House Bill 60, which will resurrect three sales tax holidays that had been suspended as part of the compromise package. The House voted 93-2 to bring back the sales tax holidays. Davis and McFarland are OK with that adjustment, which would cost the state an estimated $4.9 million.
“It’s not a lot of money and it’s something constituents called and said they wanted,” Davis said.
What worries her, however, are the bills that would dismantle the deal: House Bill 599, by House Majority Leader Lance Harris, would gradually scale back the 4.45 to 4 cents; and House Bill 584, by Rep. Dodie Horton, R-Haughton, which would flat do away with the additional sales tax.
House Ways & Means Committee Chair Neil Abramson hasn’t scheduled the two bills for hearing, saying Thursday the committee hasn’t made it through the avalanche of legislation that was filed. The session must end a little more than five weeks from now, on June 6.
For Harris, it’s all about the surpluses. Louisiana’s economy has produced higher than expected collections versus promised spending on services: a $308 million surplus from the budget year that ended June 30, $110 million in unbudgeted money for the current year and $119 million in the financial year that begins July 1.
While true that surpluses legally cannot be added to the general fund, which pays ongoing expenses, and can only be used for specific one-time expenditures — like funding construction projects or improving the state's rainy day fund — Harris argues their existence is indicative that the state is taking in more tax dollars than needed.
“With the excess and the surpluses, we are extracting too much money out of people’s wallets,” Harris, R-Alexandria, told The Advocate Thursday. “We should be giving some of that back.”
“How can you ask people to trust us if we pass a tax and then a month later we have a surplus?” Horton asked Thursday.
Ultimately, Democratic Gov. John Bel Edwards will decide, and he won’t until the bills reach his desk.
For him, fiscal stability is important.
“I’m going to be very protective of the general fund. That’s how we support our critical priorities. That’s how we give teachers a pay raise. We have a few more dollars for higher education, which is critically important. We have more TOPS students that we have to pay for,” Edwards told The Advocate Wednesday.