Second Special Legislative Session leaves $347M deficit unplugged
28th June 2016 · 0 Comments
By Christopher Tidmore
Contributing Writer
The final budget, approved by the Senate at 10 pm on Thursday (and the House with just 15 minutes prior to midnight) funds an extra $50 million for the safety-net hospitals that serve the poor, the entire sum sought by Edwards, yet $30 million below the allocation sought by the public-private partnership hospital providers.
A $44 million shortfall in state aid for public schools was reduced to $24 million.
As midnight approached on Thursday, June 23, 2016, and world leaders reacted with shock and awe at the British referendum’s decision to exit the European Union, Louisiana legislators had other priorities. They scrambled to finish a budget deal before the 12 p.m. deadline ending of this year’s Second Special Session, somewhat unsuccessfully.
Ultimately, the Senate agreed with a House Budgetary instruction that the Taylor Opportunity Program for Students (TOPS) should pay 100 percent of the scholarships for the Fall Semester, and then reduce expenditures to 40 percent in the Spring Semester of 2017, in a hope that higher revenues might allow the scholarship program to be fully funded later. Gov. John Bel Edwards indicated that he would line item veto that budgetary provision, returning to funding 70 percent of TOPS for both semesters. The cost to students would be roughly $2,100.00 in unexpected tuition payments.
Nevertheless, the second special session of 2016 ended as the irrepressible force of Republican opposition to income tax hikes slammed in to Governor Edwards’ opposition to a new sales tax increase. One of the great misconceptions about the second legislative session centered around Republican opposition to all tax increases.
The legislature approved $263 million last week thanks to GOP swing votes, yet the Republican legislative leadership signaled months ago that it would consider plugging the full $600 million deficit, if the Governor would accept another sales or consumption increase beyond the one penny enacted in the First Special Session in February and March. Edwards refused categorically another penny this time, seeking millions more in income taxes instead. Those efforts failed, and an attempt by Senate President John Alario to revive an effort to cut income tax deductions in half on Thursday morning enjoyed little support.
However, Edwards’ stated opposition to sales taxes did not stop the Governor from accepting the single major tax passed by the legislature this month, new revenues which constituted essentially a sales tax. The added levy on HMO insurance policies is expected to produce $190 million towards plugging the $600 million deficit—a $550 in ‘sales taxes’ for every $10,000 of coverage.
The final budget, approved by the Senate at 10 p.m. on Thursday (and the House with just 15 minutes prior to midnight) funds an extra $50 million for the safety-net hospitals that serve the poor, the entire sum sought by Edwards, yet $30 million below the allocation sought by the public-private partnership hospital providers. A $44 million shortfall in state aid for public schools was reduced to $24 million. A myriad of government departments and programs will see cuts come the new fiscal year on July 1st, from monies for schools for the deaf and visually impaired, state museums, prisons, and LSU Medical Schools in Shreveport and New Orleans to decreases in Gubernatorial, Legislative, Judici-ary, and Attorney General’s staff.
Colleges and universities emerged less unscathed from the 2nd Special Session, earning the full $55 million that Edwards had requested. In fact, HBCUs such as Grambling and Southern universities won an additional $4.5 million, in part because University administrators opted for higher cuts in TOPS over reductions in Higher Education general funding, based on the logic that HBCUs do not benefit from the scholarship program in anywhere the same degree as LSU and other public universities.
The additional $88 million raised came thanks to a series of smaller tax bills the legislature passed last Thursday. Senate Bill 6 will garner $17 million by eliminating tax rebates filed by big companies on their inventory taxes. (Final amendments on Thursday made sure that tax credits will remain untouched, as well as creating an extra $5 million in revenue.)
Another $57 million was projected to come from Senate Bill 10. Companies will now have to decide between claiming the Industrial Tax Exemption or the Inventory Tax Credit, should they qualify for both. Nevertheless, in a last-minute compromise, those companies who opt for the Industrial Tax Exemption will also have an opportunity for rebates from the state if their Inventory Tax Credit amounts to more than their income tax bill. That lost refund will apply to taxes over the next five years, leading some staff to speculate that the tax change will produce less revenue than estimated.
Other tax changes either produced less money for the state, or left staff confused on how much money will actually be garnered. House Bill 50 intended to reduce the state capital gains tax deduction, though, in such a manner where no one is sure if revenue will increase. House Bill 51 actually cost the state money. The change was uncontroversial with legislators, though, as it restored the sales tax exemption for several nonprofits programs—including Girl Scout cookies—which lawmakers accidently removed during the first special session.
Despite last week tax increases, the Legislative Fiscal Office still projects another $1.5 billion deficit next year.
This article originally published in the June 27, 2016 print edition of The Louisiana Weekly newspaper.
