State Rep. Randal Gaines: The Impracticability of the Republican Fiscal Agenda
State Rep. Randal L. Gaines (D-LaPlace) is the chair of the Louisiana Legislative Black Caucus and a practicing attorney. He was first elected to the legislature in 2011.
With strong leadership and support from Democratic legislators, Gov. John Bel Edwards has relentlessly attempted to pass progressive legislation that would effectively surmount Louisiana’s pending fiscal crises (also known as “the fiscal cliff”), and consistent efforts by House Democrats have been directed toward proposing and passing legislation that would promote long-term fiscal reform.
For the past ten years, the Republican-controlled Ways and Means Committee and the Republican majority in the House of Representatives have, without justifiable reason, perpetually resisted efforts to implement fiscal policies designed to generate sufficient revenues that would adequately address Louisiana’s short-term budget shortfalls and ensure long-term fiscal recovery and prosperity.
Louisiana’s current fiscal crises resulted from a combination of factors.
During the time period covering 2007-2008, Louisiana was rolling in money. Recovery dollars related to hurricanes Katrina and Rita were pouring into the state. Direct federal aid to the state increased from $6.3 billion in 2005-2006 to $12.8 billion in 2007-2008. Oil and gas revenues were at an all-time high and natural gas and oil prices peaked in 2008, bringing in additional revenues to the state through mineral taxes. Payroll taxes increased as a result of the increase in oil and gas production and hurricane recovery jobs. And the 2002 Stelly Plan was generating approximately $800 million per year in revenues.
Instead of planning for inevitable economic downturns, in 2008, the legislature increased spending, implemented tax cuts, gave additional corporate credits and exemptions, and repealed the highly-effective Stelly Plan, resulting in an estimated $800 million reduction in state revenues.
In addition to the state’s revenue reduction actions, as the country entered into the 2008-2010 recession, oil prices declined, and the decline in oil and gas production resulted in a decrease in high-paying oil and gas production jobs here in Louisiana.
The above actions and factors resulted in the state facing major escalating budget deficits between 2010 and 2016, reaching a staggering $2 billion by January 2016.
The state’s legislative auditor reported that Louisiana granted a staggering 464 exemptions from state taxes, amounting to $7.9 billion in Fiscal Year 2016. We awarded $400 million more in tax exemptions than the $7.5 billion we collected in tax revenue. Even more disturbing, the auditor reported that the state collected $624 million in corporate income and franchise taxes in 2014, while paying out almost $1.7 billion in corporate tax exemptions.
From 2010 to 2015, despite strong protests from Democratic legislators, and despite increasing state budget deficits, former Gov. Jindal and the Republican-led legislature refused to take essential steps to pass revenue-raising legislation to offset the state’s declining revenues.
Gov. Jindal insisted on promoting the ill-conceived and counterproductive “Revenue Neutral” policy which was heavily supported by the majority of our Republican legislators.
He employed band-aid budget gimmicks and fund sweeps as temporary budget solutions. It should be noted that the Grover Norquist “anti-tax” pledge embraced by Republican elected officials was never intended to be adopted by state governments.
The financial structure of most state governments cannot withstand long periods of declining revenue. Properly administered revenue-raising initiatives are necessary to ensure sustained state governmental services.
This particular anti-tax rhetoric, however impractical and unrealistic, was simply developed to help elect Republicans to national office.
In order to avoid taking available steps to reverse the fiscal decline and raise sufficient revenues to provide for critical state services, Republican legislators have continued to insist, without justification, that the state has a spending problem.
Instead of taking proactive steps to develop state fiscal policies that will generate necessary revenues to make much-needed improvements to the state’s infrastructure, ensure adequate healthcare, and enhance the quality of our higher education system, they insist on supporting revenue policies that will limit the state’s ability to generate optimum revenues, promote continued fiscal instability, and further decrease the state’s declining credit rating.
Under the current administration, the state has already made over $230 million in spending cuts.
Ten years ago, Louisiana provided 60% of the funding for higher education. Currently, over 70% of higher education funding falls on Louisiana’s families. During the Jindal administration, funding to higher education was cut at a higher rate than any of the other state in the country.
The Republican fiscal agenda will cause drastic statewide funding cuts to critical state services, including higher education, health care, public safety, and corrections.
Importantly, they have not produced any verified data to demonstrate why these proposed departmental cuts are justified or needed, nor have they demonstrated how the proposed cuts will impact the state’s ability to provide for vital state services.
The legislature has been called into special session on an unprecedented six occasions for the purpose of allowing us the opportunity to correct Louisiana’s fiscal decline.
To date, no long-term fiscal solutions have been supported or passed by the Republican majority legislature.
It’s time to end the political rhetoric and take decisive, proactive action to address the political reality that Louisiana does not have a spending problem, it clearly has a revenue problem.
It is imperative that the Louisiana State Legislature fulfill its responsibility and take steps necessary to effectuate long term fiscal reform that will enable the legislature to charter a progressive course for the great State of Louisiana.
Play Ball!
It began promisingly enough, when the Louisiana Senate took the field in the next-to-last day of the second special session. Three up, three down, with passage of a trio of Senate resolutions, and then the House bills came up to bat.
First up was HB 3, the bond act for funding capital outlay projects. As Sen. Revenue and Fiscal Affairs chairman J.P, Morrell (D-New Orleans) reminded his team, the bill had whiffed in the regular session. They gave it a base on balls, 33-0.
But before they could get to the heavy hitters – the budget bills, and the tax measures – they brought the tarps out. Rain delay, in baseball terms – recess, in legislative lingo.
There followed conferences on the mound, behind the plate, in the outfield, and in the dugout. And once those concluded, there was ample distraction for the players, as they awaited resumption of the game. Senators and observers alike were watching LSU take on Northwestern State in the NCAA baseball regional semifinals. Once the Tigers defeated the Demons, 9-5, it wasn’t long before the Senate game resumed, and took up the main budget bill, HB 1.
Senate Finance chairman Eric LaFleur (D-Ville Platte) explained the overall status of the bill, saying, “We funded the public-private partner hospitals, medical schools and DCFS; we intend to fill higher ed at 100%, and we also funded 100% of TOPS. We’re funding $586-million of the $648-million that makes up the fiscal cliff.”
And while legislative staff worked to enter all the suggested changes into their proper slots within the voluminous budget bill, rather than get charged with delay of game, they brought in a reliever.
Sen John Milkovich (D-Keithville), proceeded to lob a series of wild pitches – offering a string of amendments to the budget, much as he had done during the regular session. They included a hiring freeze and a pay freeze for the executive branch, breaking the state’s contracts with the Saints and Pelicans, and ending the film tax credit program. None of them crossed the plate.
As part of his wind-up for his final pitch – an amendment that would strip $50-million from the Department of Education – Milkovich took a moment of personal privilege.
“You know, we should all recognize that our Senate President treats everyone with respect, and allows them to state their views,” Milkovich said.
“Thank you, Sen. Milkovich,” Senate President John Alario responded, “But I am still not voting for your amendment.”
When that one failed on a vote of 1-36, Alario did compliment Milkovich in return, for his “handling those amendments very efficiently.”
LaFleur returned to the mic, then explaining that the bill now utilized the $541-million in tax dollars they would be voting on later, and $53-million of annual proceeds from the BP settlement, which would have otherwise been placed in the Rainy Day Fund, Elderly Trust and Transportation Trust Fund.
“We didn’t have enough to fund everything,” he told them. Then, laughing ruefully, he added, “We’ve always been credited with being able to pull off Harry Potter-type budget magic. This time we can’t. “We can only do what we’ve done here by taking money from some other agency. LDH is going to sustain $126-million in total cuts, and several other state agencies are cut between two and five percent. But that’s all we can do today.”
While most who came to the lectern to ask questions about specific details were appreciative of the work the Senate Finance chairman had done, one member of his committee wasn’t above kicking some dirt on the umpire’s shoes.
“We have a process, and that includes vetting all these changes in committee first, so we can see what we’re doing with the money,” Sen. Jim Fannin (R-Jonesboro) complained. The process loses integrity when we do this in just one hour on the floor, especially since we’ve been here since February!”
“We got this bill Thursday night,” LaFleur replied. “We’ve only had it for 72 hours. As you know, having formerly chaired House Appropriations, chasing the money around isn’t easy. We did the best we could in the time we had.”
Those amendments were approved 33-6. The bill itself passed, 38-1, and was sent back to the House for concurrence on the Senate changes.
Next, Sen. J.P. Morrell brought up Rep. Katrina Jackson’s HB 18, which cuts back state income tax credits for taxes paid to other states. He convinced 25 senators to support amending it to include the Earned Income Tax Credit increase which– as a stand-alone bill – they had previously approved. As he explained Sunday, “This means it will bypass the Ways to be Mean committee on the other side.”
Then it was time to consider the major revenue-raiser: HB 27 by Rep. Lance Harris. Senator Bret Allain (R-Franklin) brought the amendment to change the sales tax renewal from one-third to one half penny, and alter some of the provisions Revenue and Fiscal Affairs had added in an effort to raise more revenue than the House had been willing to do.
“This amendment also restores a sunset to these sales tax changes,” Allain explained. “But instead of five years, the sunset is 7 years from now, in 2025.”
On a vote of 36-2, that change was adopted.
Sen. Page Cortez (R-Lafayette), the chairman of the upper chamber’s Transportation Committee, then offered an amendment to increase the sales tax by another 4/10 of a cent, to be used for funding transportation mega-projects, such as a new I-10 bridge in Lake Charles, a new Mississippi River bridge in Baton Rouge, and elevating the remainder of LA 1 to Port Fourchon. It generated considerable discussion of the unfunded needs, which was Cortez’s point, though he ultimately withdrew the amendment.
Then Sen. Morrell proposed an amendment to charge sales tax on installation services. After all, he said, “Repair services are required to charge sales tax. Installation services do not. Based on information gathered by the Department of Revenue over the past two years, this will generate another $25-million in revenue.”
Further, Morrell explained, “This is where we could find the funds to increase the EITC. We know sales tax disproportionately impacts our poor, but in order to give tax relief to our working poor, we have to pay for it. Let’s be responsible and fund something we think is a priority.”
The amendment passed 22-15, and then the full Senate gave a 29-9 nod to HB 27.
The House, which has dominated the division for the past several seasons, will have both the budget and HB 27 in their starting lineup for the last day of the session. Will they throw beanballs at the Senate compromise offerings, or try to send the whole thing into more extra innings? Or will we all be able to enact — in the words of the late, great George Carlin — “the purpose of the game, which is to go home”?
B is for Budget, Backlash, and Bologna
The morning after a Senate committee delivered a stinging rebuke to the House by increasing the revenue generated by Lance Harris’ (R-Alexandria) sales tax measure, then hijacking Walt Leger’s (D-New Orleans) HB 12 to create another bill just like it – but with a more cooperative author – the full House took up the budget. And on what is always a day filled with tension, it didn’t take long for the backlash to begin.
House Appropriations chair Cameron Henry (R-Metairie) made it clear from the start that he intended to, as usual, keep the members on a short leash when it came to changes.
“I know everyone is buzzing about what happened last night on the other side, the money that might be raised by Rep. Harris’ bill. But I’m not comfortable with spending more than the REC has recognized. That’s what this bill does,” Henry said. “The supplemental bill, which we will do after this, will distribute any additional revenue.”
The Appropriations chairman had not intended to do a budget bill this session, preferring to wait till the revenue bill made it all the way through the process, and then “save the day” by leaving both chambers no choice but to override the governor’s veto of the previous session’s HB 1. Rep. Walt Leger, wise to Henry’s machinations, forced that plan to change earlier in the week. And it was Leger who rose first to question Henry about the budget bill.
“Is it correct to say that this bill reduces the Department of Health by $90-million dollars, which is a total reductions of $495-million when you factor in the federal match?” Leger asked.
“Out of about $13-billion total for LDH. Correct,” Henry replied.
“And this contains language that tells LDH they cannot make cuts to the public-private partner hospitals, to waiver serves or to nursing homes. With those limitations, where do you expect them to make the cuts?” Leger asked.
“If I tell them what to do, I’m micro-managing,” Henry replied. “They have room to move money around. This lets them spend about $52-million a day. It depends on what LDH makes a priority.”
“And you are reducing the Department of Corrections by $25-million more, in addition to not paying the sheriffs for housing state prisoners?” Leger inquired.
“They live in that world of always wanting more funding,” Henry said, dismissively.
“This HB1 is using the money cut from LDH to fund TOPS at 80%?” Rep. Pat Smith (D-Baton Rouge) asked.
“Yes, ma’am,” the chairman answered.
“And there’s even more money for TOPS in the supplemental bill, but you are cutting higher education by $26-million. Are you aware that will impact the classes that will be available for TOPS students to take?” she asked.
“You’re talking about a $3-billion overall budget for higher ed, and we’re just asking them to take a $26-million dollar cut,” Henry responded.
The first major flare-up of the day occurred a few minutes later, when Rep. Tony Bacala (R-Prairieville) proposed an amendment to reduce LDH funding even further, in order to put more toward private school vouchers, and supplemental pay for private school cafeteria workers. Rep. Tanner Magee (R-Houma) got up to object.
“I’m a Catholic and I send my children to private schools, but I can’t endorse this,” Magee said. This is a budget about priorities, and we all know the ultimate result of the cuts to LDH will be to gut mental health. I can’t justify fully funding private school lunches when there are so many other unmet needs.”
“What about funding Hollywood productions, funding NGOs, horse racing purses? Did you vote to cut them?” demanded Rep. Jay Morris (R-West Monroe), his voice shrill with anger.
“Are you making this about some bill you already brought and we voted against?” Magee asked, clearly stunned by the sudden attack. “I don’t remember how I voted on that, since we had like a thousand bills last session. But you’re still upset about it, it seems.”
“So your priorities are not to give lunches to private schools, but you’ll vote against cutting NGOs?” Morris asked hatefully.
“You’re making this melodramatic,” Magee replied. “But I’m not going to allow your personal attacks, sir.”
“Well, isn’t that convenient?” Morris said, as he sat down, still in a huff.
While the shouting was going on, Rep. Bacala was in earnest conversation with Rep. Henry. Ultimately, he withdrew the amendment, promising they’d have another chance at it when the supplemental spending bill came up.
There was one more raid on health care funding, however. Rep. Franklin Foil (R-Baton Rouge) offered an amendment to fully fund higher education.
“It’s an important investment, and the money comes from reducing payments to the public-private partner hospitals,” said the vice-chairman of the Appropriations committee.
Despite the fact that that action contradicted HB1’s language prohibiting LDH from making such reductions, the amendment was approved, without objection.
In closing on the budget bill, Henry said, “HB 1 appropriates 32.9 billion dollars in total, and matches the State General Fund amount recognized by the REC. I know it’s not perfect, but I ask your favorable passage.”
And after getting a 96-6 vote to approve, Henry moved on to the supplemental spending bill, HB 35.
“This appropriates the money in Rep. Harris’ bill — as it left here. That’s $396-million. I know the temptation today is to spend the money raised by the Senate, as fast as humanly possible. That money has literally received one committee hearing. I urge you to be very cautious in your desire to spend all this money before it has a substantive debate on that floor or this one,” Henry warned.
Once again, Leger was the first to address Henry.
“I appreciate the caution you’ve instructed us to have, but you and I have been here ten years, through 452 sessions…”
”453,” Henry interrupted, smiling.
“You’re right,” Leger smiled back. “And we know that when we send this over to the Senate, they will spend the money.”
“True, but on this side, we can’t be sure of how they’ll change the revenue bill, or how much will be available,” Henry replied. “This supplemental bill spends what money we have confidence will pass. We don’t want to give people false hope that any more than that will exist.”
That didn’t stop the parade of proposed amendments: adding money for the Department of Corrections, for workforce rehabilitation services, for public defenders, restoring wildfire-fighting services.
Henry objected to each and every one, saying, “It’s a worthy cause, but spending money we don’t have sets a bad precedent” – or some variation thereof.
Each amendment, nearly all presented by Democrats, failed. Even an amendment to restore $270-thousand for repairs and maintenance of LPB’s transmission towers failed to win approval.
At one point in the proceedings, the Speaker asked, “Mr. Anders, why do you rise?”
“Is the pizza coming? My blood sugar is getting low,” Rep Andy Anders (D-Vidalia) complained.
“It will be here soon,” the Speaker advised, chuckling. “It’s a big order. But we have just received bologna sandwiches from the Lt. Governor. They’re in the members’ lounge.”
Was it a message from Republican Lt. Gov. Billy Nungesser, who was criticized by several GOP House members for having appeared at a pre-session rally with the governor? Or was it a bribe? Whatever it was, it didn’t help, for immediately after the bologna announcement, an amendment was offered to restore funding for state parks. It too, failed.
The final amendment of the 26 proposed was to allocate $17-million to restore funding for non-public schools. While Henry objected to this, as well, it got approved, 89-11.
And as soon as the full House approved the supplemental spending bill, 96-7, the Speaker announce, “The pizza has arrived.”
The full House also considered the Speaker Pro Temp’s budget bill, HB 27. Leger began by amending the bill to make it an exact duplicate of Henry’s HB 1.
“This is part of the process, making sure we have a backup. I feel it’s prudent to continue to work on a parallel track,” Leger explained.
“I don’t see why we need this,” Rep. Blake Miguez (R-New Iberia) argued. “We have Chairman Henry’s HB 1, and have now sent it over to the other side.”
“You have it now,” Leger said. “But we were here for eight days and if I hadn’t moved to discharge the committee, there wouldn’t have been an HB 1. The intent was to leave us no choice but to override the governor’s veto.”
“Are you going to bring your own budget bill every time, as long as Henry is chairman?” Miguez asked, aggressively.
“That may be necessary,” Leger said, solemnly. “If you remember last year, with 30 minutes left to go in the session, the chairman refused to allow the budget bill to come to a vote. I can guarantee you, this body will be able to vote on a budget, whether it’s to concur, go to conference, whatever is necessary.”
“Your bill was amended in Senate Revenue & Fisc last night. Did you have anything to do with that, trying to hijack the entire process?” Miguez asked, with a sneer.
“I wasn’t here, and knew nothing about it until I started getting text messages,” Leger replied.
“Members, I have a grave concern, based on what I’ve heard both on and off the mic, that there is an intent to make this session fail and force us into a third special session, whether it’s for revenue, the budget, or to address matters that are not on the current call,” the Speaker Pro Temp spoke to the full House. “You know, I don’t think I’ve heard anybody outside this building talk about who the author of the budget bill is. Other bills, yes. But it’s a sign that the budget belongs to all of us, and to all of the people.“
Rep. Henry then rose to speak.
“Clearly, the idea is to make sure we have a budget. I appreciate Rep. Leger’s belt and suspenders approach, but it’s not necessary. I guarantee you will have a budget bill to vote on. If you want to concur, knock yourselves out. If not, will go to conference. If the conference committee falls apart, I assure you I will bring the bill back for a vote.”
“I hope this bill won’t be needed,” Leger said, on closing. “But just yesterday, we moved two identical bills on the Louisiana Checkbook – one by Rep. Ivey, the other by the Speaker – so this is not unprecedented.”
But on a vote of 42-58, Leger’s HB 27 failed to pass.
After the full House adjourned, the “Ways to be Mean” Committee met. With bills from both Sen. Jay Luneau (D-Alexandria) and Sen. J.P Morrell (D-New Orleans) on their agenda, there was little doubt the panel would live up to their nickname and try to pay the Revenue and Fisc members back for the prior evening’s out-maneuvering House attempts at strict control of the entire process.
Luneau’s SB 6, extending the 2015-passed temporary “haircuts” to business tax credit programs, came up first. Rep. Phillip DeVillier (R-Eunice) asked about the state’s return on investment from economic development incentives.
“I don’t have the exact numbers with me,” Sen. Luneau said, “But I know tourism is our best, generating $30 for every dollar invested.”
“Did the administration ask you to bring this bill?” DeVillier inquired.
“No, I brought it on my own last year, and again this time,” Luneau replied.
“Let’s go back to return on investment,” Rep. Jay Morris (R-West Monroe) interrupted. “What about the film tax credit? What’s the return on that?”
“Dismal,” Luneau said, attempting to remain agreeable in the face of Morris’ obvious aggression.
“I have an amendment that I’m thinking of putting on here, to do away with the film tax credits. What do you think of that?” Morris asked.
Chuckling, Luneau said, “If you want to kill the bill, that’ll do…”
“Move to defer,” Morris said abruptly.
“I do wish you would…”
“Move to defer!” Morris said again.
“…let me finish my sentence,” Luneau continued, patiently.
“Oh, like you did with Rep. Harris last night?” Morris sneered.
“I assure you, we allowed Rep. Harris to have his full say,” Luneau replied, with a gentle smile. “But that’s okay. I guess I didn’t expect any courtesy here today.”
At that, the committee – which is heavily weighted with hard-line Republicans – voted 11-4 to kill Luneau’s bill.
They saved some venom for the Senate Revenue and Fisc chairman, J.P. Morrell, who had two bills before them Thursday afternoon.
“SB 8 mirrors the bill Rep. Foil passed on the House floor today, regarding collection of sales tax from remote sellers,” Morrell began.
“Rep. Leger had a similar bill,” Rep. DeVillier remarked. “Was he in your committee last night?” (That bill by Leger was the one the Senate committee “hijacked” to become a backup sales tax revenue measure, in case Rep. Harris became utterly recalcitrant over the changes they made to his bill.)
“No, he was not,” Morrell answered. “And he knew nothing about what we would do. I remind you that legislative intent is the collective will of the legislature, and not the intent of a particular bill’s author.”
“It’s for that very reason I have concerns about moving your bill forward,” Ways and Means vice-chairman Jim Morris (R-Oil City) said. We’ve all seen bills leave here as a blade of grass, and seen them come back as a bale of hay.”
“In that case, this bill is in the best hands, since it is in the House. There is almost no danger it will become a bale of hay, since you are in control. I would be more nervous about your bills on our side,” Morrell advised.
“You’re suggesting Rep. Foil’s bill will be hijacked, too?” Rep. Barry Ivey (R-Central) asked.
“I am not suggesting any need to hijack any more bills,” Morrell answered.
Yet the House committee swiftly dealt SB 8 its coup de grace.
Morrell had one more bill to offer, SB 10, to increase the state’s Earned Income Tax Credit.
“This is a modest increase of 1.5% to the EITC,” he explained. “Since the backbone of the budget fix is, at this point, continuing our reliance on regressive sales tax, this provides a small measure of relief to our state’s working poor families. And, as many of you are aware, the federal EITC program was created by Republican President Ronald Reagan, in order to encourage people to go to work.”
Testimony from advocacy groups followed, though committee members were already familiar with the arguments, having heard – and rejected – similar House bills earlier in the session.
Rep. Devillier, addressing Morrell, wanted to know how many Southern states had their own EITC. Morrell told him four: Louisiana, Oklahoma, Virginia, and South Carolina.
“But Texas does not?” DeVillier asked.
“It’s an income tax credit,” Morrell replied. “Neither Texas nor Florida have state income tax.”
Morrell’s pointing out that obvious impossibility seemed to re-ignite the backlash.
“Is what came out of your committee your solution to the fiscal cliff?” Rep. John Stefanski (R-Crowley) demanded.
“I think it’s the way to start the conversation,” Morrell said, reasonably. “This has begun a dialog – one we haven’t been able to have before this.”
“All of y’all seem to think sales tax regressive, and that’s why we chose to make it temporary,” Vice-chair Jim Morris complained. “Yet you made it permanent. How do you justify that?”
“My committee chose to do that,” Morrell said. “The expiration date of Rep. Harris’ bill would have election year, and we all know it’s impolitic to consider any kind of tax issues in an election year.”
“How many bills in two sessions has your committee received to fix cliff?” Rep. Ted James (D-Baton Rouge) asked, attempting to defuse some of the animosity directed at the senator.
“Just one,” Morrell replied, at which James remarked, “We haven’t give y’all much to work with, then.”
“I have a bill to fix that,” Morrell answered, with a wink. “If we had multiple instruments, we could do separate debates. On who is affected, and whether that is a particular policy we want to pursue. I know many of you are opposed to increasing taxes on business in any way, however with just one sales tax bill, we kind of had to clown car and stuff them all in.
“On this particular bill, though, it’s obvious that sales tax is part of the present solution to our giant fiscal crisis, and if we’re going to do that, it’s appropriate to provide some relief for the working poor of our state.”
Nope. The EITC bill was killed.
And that’s where we stand, going into a working weekend for both chambers, as the session must end by 11:59 p.m. Monday. The House, with a bare quorum of 58 members, convened Friday morning and has since adjourned till Sunday. The Senate Finance Committee is working through the budget Friday and Saturday, with plans for a full floor vote on Sunday. The full upper chamber still has to debate and vote on the sales tax bills (remember, there are two now – one by Harris, and a duplicate by Leger). That vote could come Friday afternoon, Saturday, or Sunday.
The clock is ticking, and – so it seems – is the time bomb.
Your Way or the Highway? Hit the Road, Lance
The Senate Revenue and Fiscal Affairs Committee graciously allowed House GOP Caucus chairman Lance Harris to brag his way through presenting HB 27, even encouraging him to air his inflated opinions regarding his success at finally getting a revenue-raising measure across the building for their consideration. But ultimately, they punctured the windbag.
“This renews one-third of thye fifthy penny of sales tax, cleans the remaining four pennies, and retains the full sales tax exemption for residential utilities,” Rep. Harris (R-Alexandria) told committee members Wednesday evening. “This is a compromise, and it has the best chance, the most promise, of solving most of the state’s critical funding needs. And I believe, in my circle of influence in the House, that it won’t pass all the way through this process if it is drastically altered on this side of the building.”
“How much does it raise?” Sen. Karen Carter Peterson (D-New Orleans) asked.
“$363-million, and with my colleague’s bill, you’re getting $395-million total in replacement revenue,” Harris replied, proudly.
“Thank you for doing this, since I know it’s outside your comfort zone,” Peterson said. “If I may ask, do you think it is adequate to cover the need?”
“It’s a portion of it,” Harris said. “Of course, the crux of the argument is what is the need?”
“What do you believe it is?”
“Just about this amount,” he answered. “But I also believe state government is capable of making spending reductions while still preserving needed services.”
“Since you are leading this effort, what would you cut?” Peterson asked.
“That’s a question for the budget debate, which we’ll be having in the House tomorrow,” Harris replied. “I’m here for this bill tonight.”
“You like being in control of state government, don’t you?” she asked, sweetly.
“It’s what my constituents sent me here to do,” he answered.
That left a door open for Sen. Jay Luneau (D-Alexandria), who represents the same area as Harris.
“I share those constituents with you, and more, “ Luneau said. “We also shared the same math teacher at Pineville High, back in the day – Ms. Mount. Now, we all understand the shortfall to be $648-million, but you’ve been insistent that it’s only $495-million. Could you explain how you came up with 495?”
“When you take the amount we’re spending in the current year, as of December 1, 2017, and you subtract the REC estimate for state general fund revenue for the upcoming fiscal year, it’s $495-million,” Harris replied.
“We have a formula that the state has used for years to make these calculations, and that isn’t it,” Luneau said. “You’re asking us to use a different formula, with no reasonable explanation as to why you are right and all the rest of us are wrong?”
“In Appropriations, we ask the departments if they can live on what they are getting right now – on what they have now,” Harris responded. “So calculating on this basis is the best way to ensure the state lives within its means.”
“Rep. Harris, I’ve heard you say that your method and your bill will only result in departmental cuts of 1.3% next year,” Luneau continued. “What if we use the method the rest of the state uses – what would the percentage of cuts to the departments be then?”
“I haven’t calculated that. I’ve only done it my way,” Harris replied. “But my bill is a compromise. It has the best chance of fixing this. I’ve already proven that by getting 76 House members to vote for it and send it over here to you. Pass this. If not, there will be much larger cuts.”
“We in the Senate have been waiting patiently for a year and a half for you in the House to send us some bills that would attempt to solve the fiscal cliff, and now we get this,” Luneau commented. “You say it’s this or nothing. It is not a compromise if you only offer take it or leave it.”
“I have my Webster’s dictionary here,” said Sen. Gerald Boudreaux (D-Lafayette). “It defines ‘compromise’ as ‘an agreement reached by each side.’ Since this is our side’s first opportunity to debate a bill from your side, it is not yet a compromise – especially not when you present it as being ‘your way or the highway’. I take that as more of a threat.
“People in this state are sick and tired of y’all saying ‘reduce government’ and not saying where. When they’re in a wheelchair, you can’t take half the wheels off, and then tell them, ‘You’re on your own.’ When it comes to life, we are not going to be party to your picking winners and losers. On that, there will be no compromise,” Boudreaux warned.
“Rep. Harris, we’re going to take you at your word, and observe your line in the sand,” Revenue and Fisc chairman J.P. Morrell said. “We are not going to raise the sales tax renewal by any more than one-third of a cent. But we are going to clean some of your preserved exemptions off the remaining four cents state sales tax. It’s a short list, including manufacturing machinery and equipment and all non-residential utilities, but it’s an expensive list – around $300-million dollars. And we’re going to make this permanent.”
Harris was defiant.
“Have at it – your prerogative,” he said. “But this won’t pass the House.”
“What about what will pass the Senate?” Morrell asked. “Part of compromise is the House not sending bills over to us saying ‘take it or leave it’.”
“I will reject the Senate amendments and the bill will not pass,” Harris insisted, his face flushing with anger.
“How much does this generate, with all the amendments?” Sen. Peterson asked the chairman.
“$642-million,” Morrell, grinning, replied.
“If you’re the author of the one bill to save the state, I would suggest you be open to working with both the House and Senate leadership,” Sen. Peterson then admonished Harris. “Keep an open mind. It’s a good thing.”
“It’s time for people to man up in this building, and own the cuts needed to reduce the size of state government,” Harris said, at this point looking as though his head would explode. “We’ll show you tomorrow, on House Bill 1,” he threatened.
Yet the amendments were adopted, without objection, and the bill moved favorable to the Senate floor – also without objection.
But they weren’t done, as the committee’s next action pulled out the proverbial hatpin to pop Harris’ balloon of self-importance.
Chairman Morrell called the other revenue-raising measure received from the House, HB 12 by Rep. Walt Leger (D-New Orleans), and amended the entire content of Harris’ bill into it, creating a carbon copy – but with a different, more impartial author.
“We now have an alternate instrument, giving us the ability for reasonable conversations,” Sen. Peterson observed. “It’s good and healthy that we not be held hostage by any one individual.”
And if that wasn’t enough, the same day the full Senate considers these two revenue-raising bills, they’ll also have a proposed constitutional amendment to discuss. SB 22 by Sen. J.P. Morrell would remove the current constitutional requirement that all revenue-raising measures begin in the House.
Hey, House – do you hear the Senate now?
The Play is the Thing
It was a display of theatrics reminiscent of themes from Shakespeare, when Louisiana’s House met on Memorial Day afternoon. The chairman of the House Appropriations committee gleefully cast himself the role of villain, when he dramatized his antipathy for the Democrats in general, and the governor in particular.
Initially, it appeared their weekend apart had been a “balm of hurt minds”, soothing members’ frayed tempers and allowing them to come together to pass some revenue-raising measures.
Rep. Walt Leger’s bill defining “remote sellers” for the purposes of collecting sales tax received unanimous approval, 101-0, while Rep. Katrina Jackson’s HB 18, extending the soon-to-expire limitation on credits for taxes paid to other states, was approved 69-31. It adds $33.6-million to state revenue in the upcoming fiscal year.
On the other hand, Jackson’s bill to extend for five years the 20% reduction to certain business tax rebate programs – a bill that would generate another $11-million – failed, 51-52.
The largest generator of revenue still viable this session, Rep. Lance Harris’ HB 27, came up next. It extends one third of the fifth penny of state sales tax for the next five years. It also cleans exclusions from the remaining four cents, and will raise $366-million, reducing the looming drop off the fiscal cliff.
“I know we spend a lot of time on this Friday,” Harris said. “And everybody knows what this bill does.”
That bill, which required a minimum of 70 House votes to advance, had only gotten 64 votes for approval on Friday. Yet with no debate, it sailed through on a vote of 76-28 this time, and heads to the Senate where – it’s presumed – the upper chamber will amend it to continue one-half cent, rather than one-third.
The collective sigh of relief over successfully advancing a major revenue-raising bill was short-lived, however, as Speaker Pro Temp Walt Leger asked for his HB 26 to be called from the calendar.
“Members, we have seven days left. We’ve approved some revenue, and now we need an instrument to carry it. HB 1, the traditional designation for the budget bill, has not been filed, but we have HB 26,” Leger said of his version of the budget bill. “Appropriations meets tomorrow, but this bill is not on the agenda. Therefore I make a motion to discharge the Committee on Appropriations and recommit HB 26 to the Committee of the Whole.
“There’s no need to wait any longer. Let’s continue to get the work done, and build on the momentum we have – without any further delay and without any further special sessions,” Leger urged.
House Appropriations chairman Cameron Henry (R-Metairie) objected.
“We have a job to do, and the job has rules. First off, the state constitution says the budget ‘shall not exceed the official forecast of the Revenue Estimating Conference’. Another small snag: this bill appropriates $648-million dollars that we didn’t raise. We just raised about $400-million,” Henry said. “So we can go against the constitution, or we can wait until we know exactly how much revenue we have available.”
“No one wants to pass a bill that appropriates dollars that don’t exist, but why can’t we pass a budget bill that doesn’t appropriate the additional funds?” Rep. Barry Ivey (R-Central) asked.
“We’ve got to get as most accurate as we can when dealing with the state budget,” Henry insisted. “And our Appropriations committee members have said they need to hear public testimony to decide where the funding should be allocated.”
“So you’re insisting we go to another special session?” Ivey asked, to make the scheme perfectly clear.
“I wish there was a way around it,” Henry said, with an elaborate sigh. “I have involved the Treasurer and Attorney General in making sure we do everything we can.”
Wait…what cruel jest is this?
Rep. Pat Smith (D-Baton Rouge), the longest-serving member on the Appropriations committee, wasn’t buying the chairman’s act.
“You said you spoke to members of appropriations? How could you? You haven’t even been here!” she challenged him.
“I’ve spoken with some of them, and will discuss it with you and the rest after we adjourn today,” Henry replied airily. “But I’ve got the general idea.”
“We know what is needed, so we should just move ahead now,” Smith insisted.
“Without public testimony?” Henry asked, feigning dismay. “I’m surprised that you of all people would suggest such a thing.”
“We’ve heard it – on this side and on the Senate side – in emails, texts, messages from our constituents,” Smith answered testily. “And your starting this process all over again put the dollars into another special session, rather than into the programs our constituents want us to fund!”
“Spending $30-billion without a single day of public testimony would be worse,” Henry volleyed back.
Regarding the motion to remove Leger’s budget bill from the purview of the Appropriations committee, Rep. Robert Johnson (D-Marksville) had questions for its author.
“Has Appropriations met since we started this session?” Johnson asked.
“I don’t believe so,” Leger replied.
“Couldn’t they have been meeting and taking public testimony all along?” Johnson wondered.
“Is it possible, in the number of days we have left, to even have a budget?” Rep. Julie Stokes (R-Kenner) inquired.
“It’s possible to do with HB 26,” Leger answered. “But I don’t see how, without significant suspension of rules, we can get another bill to do this. Remember, it takes 70 votes for those suspensions. So I don’t think another bill can get through the process.”
“I think there is concern because your bill starts with $648-million added in,” Stokes advised Leger.
“Amendments can be added to change the funding, and I welcome that,” the Speaker Pro Temp responded. “I don’t believe in parking the bill, nor killing it because it doesn’t look exactly how I’d like. The budget belongs to all of us, and it reflects the will of the body more than any other thing we do. My desire is to get through the process, but to do that, we have to have a bill, and this is the only one we have.
“If you don’t vote to move forward, you’re essentially saying you’re okay without a budget, and you’re good with crashing this session. We need to act like adults, not take our ball and go home. This isn’t a game.”
Henry apparently took that statement as a challenge.
“Did you like the budget bill, HB 1, that the governor vetoed?” he asked Leger.
“I like parts of it, that it fully funded health care, and that it spoke to our priorities,” Leger replied, warily.
“If you wanted, by 6 o’clock today, your concerns about the budget could be resolved,” Henry said, slyly. “We wouldn’t have to hear a budget at all. All you need to do is withdraw your current motion, and move instead to override the governor’s veto.”
“Perhaps if you had filed a supplemental spending bill?” Leger riposted.
“You can’t supplement a budget that doesn’t exist,” Henry parried.
“You have to have a bill,” Leger defended. “Exactly my point of this motion.”
“A bill that follows the constitution,” Henry jabbed. “I didn’t write the constitution. I’m just trying to follow it.”
“And I’m trying to read it to you,” Leger insisted. “The section you quoted doesn’t pertain to what we do. It’s part of the directions given to the governor for submitting the executive budget proposal to the legislature: Article 7, section 11: ‘The governor shall submit a budget recommendation that’…”
At that, Henry proverbially dropped his sword point and bowed, saying, “I’m done. Your bill will be heard in committee tomorrow.”
Leger then withdrew his motion, and returned to his desk. Henry, on the other hand, remained at the front of the House, and could be heard remarking flippantly to House Clerk Butch Speer, “Let’s give it a whirl.”
He, like Shylock in The Merchant of Venice, was prepared to press his suit for a pound of flesh.
“I call HB 1 for a veto override,” he said. “I know we’re all desperate to go home, and I’m with you. We override; we can have a budget; and we can supplement it with another bill. If y’all are so concerned about not having a budget, we can have one right now.”
Rep. Sam Jones rose to question the chairman.
“This seems like a reaction to the previously heated debate. Are you sure this is what you want to do?”
“It makes it all easier,” Henry replied. “It’s what I’ve been working on for the last several days – trying to work around having to do the full $30-billion budget again.”
“You said earlier you’ve been meeting with the Treasurer and the A.G. Have you discussed this at all with the administration or the Senate?” Jones asked.
“No, I haven’t talked to the administration in oh…four months,” Henry said blythely.
“Was this your plan all along?” Rep. Major Thibaut asked, clearly stunned at the malicious turn the discussions had taken. “You said you’re ready to get home. I’m ready to do the people’s business!”
Next, Leger rose, and Henry turned away, announcing loudly, “I’m going to stop answering questions. Let’s vote.”
And they did, 52-48 in favor of a motion that required 70 votes to pass.
Let’s review what we’ve learned over the past several days, and what the bard called the “method in this madness.”
House Speaker Taylor Barras has no control over his party’s members – not even over those he has elevated to leadership positions.
For while there was “much ado” last Friday over the fact that 15 of 16 Democrats who voted against HB 27, the sales tax measure carried by House Republican caucus leader Lance Harris, were members of the Legislative Black Caucus, far less was said about the fact that five House committee chairmen and three vice-chairs voted against it, as well. When the votes on HB 27 were tallied Monday, eight of the Black Caucus members – along with three Republicans – had changed their minds and voted yes. Yet the eight members of the House leadership team did not budge.
Barras had best look to his command, for as Shakespeare said, “Now does he feel his title hang loose about him, like a giant’s robe upon a dwarvish thief.”
Cameron Henry, the ostensible power behind the throne, who defaulted to Barras as Speaker because he was so disliked two years ago, still cannot command a simple majority vote from the House. On the override, every Democrat except Neil Abramson, two of the three independents, and ten Republicans voted against it.
And, from the depths of his animosity toward the Democratic governor, Henry has resorted to conspiring with the Republican Treasurer and the Republican Attorney General – yet still is failing in his quest.
Henry has revealed to all now that he is, as Shakespeare said, “a poor player that struts and frets his hour upon the stage and then is heard no more: a tale told by an idiot, full of sound and fury, signifying nothing.”
A Stinky Defense
Remember the “Twinkie defense”? In 1979, former San Francisco city district supervisor Dan White was on trial for assasinating Mayor George Moscone and Supervisor Harvey Milk. White claimed “diminished capacity” due to excessive sugar intake, specifically naming Twinkies as one of the problem foods leading to his committing the murders.
House Republicans are trying similarly improbable defenses for the state’s chronic fiscal shortcomings, and they reek.
On Thursday, House Ways and Means took up a dozen revenue-raising bills, beginning with Rep. Terry Landry’s HB 11. It would make ½ of the 5th penny of sales tax permanent, and clean most exemptions from the remaining pennies of state sales tax. Supported by the administration, it would generate $543-million needed for the $648-million shortfall.
“This will go a long way toward paying for the services our citizens need and want us to provide,” the New Iberia Democrat told the committee. “And because it’s permanent, it keeps us from having to come back and do this again and again.”
Rep. Ted James (D-Baton Rouge) wanted to know what this would do for the state’s bond rating, since the three major bond rating agencies have Louisiana on a rating downgrade watchlist due to the continued uncertainties over sufficient and sustainable revenue.
“Temporary revenue is problematic. It is not looked upon favorably,” Assistant Treasurer Ron Henson testified. He reminded committee members he’s been with the office for 40 years, and has seen several ratings downgrades in that time, most often tied to state reliance on temporary revenue streams.
“If our rating gets downgraded, investors read that as additional risk to their investments. It also increases the state’s cost to finance bonds,” Henson continued. “The higher our financing costs and interest rates, the less actual money we will have to use – money that will cost us more.”
Landry’s bill preserves the state sales tax exemptions for food, prescription medications, and residential utilities. It exempts industrial utilities from two cents of the four cents of sales tax.
Revenue Secretary Kimberly Robinson explained, “This is one of the recommendations from the Tax Reform Task Force. Industrial utilities were taxed at 4-percent until 2008, when they were reduced to zero.”
That 2-percent sales tax brought representatives for the Louisiana Chemical Association and the Louisiana Mid-Continent Oil and Gas Association to the table to protest.
“Surrounding states don’t tax industrial utilities,” stated the LCA’s lobbyist Brian Landry. “We want ours to be zero.”
LMOGA lobbyist Tyler Gray was asked about the history of the tax, and told a different story than Secretary Robinson.
“It used to be zero, then in 2015 it was raised to 4-percent, scheduled to drop a penny each year until 2019, when it goes away again,” Gray said.
“So, Dow Chemical wants a new bridge across the Mississippi River, but they don’t want this. Is that right?” Rep. Ted James asked. “I don’t think it’s fair asking everyone else to give a little, and you guys are asking to go to zero.”
When the bill came to a vote, it failed, 6-11, along party lines.
Four similar bills, three of them authored by Republicans, were quickly heard and defeated, as well.
Then the committee considered HB 27 by Rep. Lance Harris (R-Alexandria). The measure confected by the House Republican Caucus chairman extends one-third of the fifth penny of sales tax for five years, while cleaning the remaining 4-cents of sales tax. And it makes industrial utilities exempt from all sales tax.
It raises just $369-million for the budget shortfall.
“This is what compromise looks like,” Harris told the committee. “This doesn’t cutas much as we want, and it doesn’t raise as much money as the governor wants, but to keep growing the size of government is irresponsible. We can’t continue to grow government on the backs of taxpayers, nor continue punishing our businesses and economy.
“This financial mess is state government’s fault, not ours. But it is our responsibility to fix it,” Harris said.
He went on to say that since the revenue shortage is “only $495-million” by their reckoning, and this bill raises $369-million of that, that would just leave $126-million unfunded. “So all we’re asking in return is a spending decrease of 1.33-percent,” Harris stated. “That’s doable. It’s not comfortable, but it’s not catastrophic.”
“Please explain this $495-million number you and Appropriations chairman (Cameron) Henry keep using,” Rep. James requested. “The administration and the Revenue Estimating Conference have set the shortage at $648-million.”
“That’s because the administration chose to use the REC figure,” Harris replied. “I want to use this year’s expenditure level because we need to shrink spending. We are using the current year budget as it existed in December 1, 2017. That says we are spending $9.4- billion in state general fund in the current year. We’re projected to have $8.9 billion in the year that starts July first. That’s a difference of $495 million.”
Here’s the problem with that reasoning: the $9.4-billion in spending Harris cites was based on the REC forecast adopted May 16, 2017 – more than a year ago. The revenue forecast has been upgraded twice since then: on December 14, 2017, and again on April 12, 2018.
It’s not the first time the House GOP cadre has taken a “choose-your-own-budget-number” approach. While they’re using a year-old spending number now, during the 2017 spring budget-drafting debates, they were insistent upon using the most recent number. At the time, that was “spending as of March 1, 2017”, following a special session needed to eliminate mid-year budget shortfalls. They then lopped another two-percent off that number in crafting their version of the next budget – an effort that ultimately resulted failure to pass a budget and last year’s second special session to remedy that. Clearly, the majority of the Legislature thought that plan stunk, and this one is just as smelly.
“So this is to raise taxes in the amount you want, not the amount the governor says we need?” Rep. Ted James asked, pointedly. “You don’t want to rely on the REC, and you don’t trust the staff, even though you trusted them when the governor was a Republican? They’re the only ones dealing in reality!”
James was referring to part of the House Republican leadership’s blame-game narrative of the past couple of years. In addition to their over-arching story of “it’s all the Democratic governor’s fault”, they have also targeted the Legislative Fiscal Office staff and the Revenue Estimating Conference.
In 2016, when fiscal note calculations didn’t produce the amounts of revenue they believed they should, Republicans took the rare step of calling a Fiscal Review Committee meeting to chew out staff members publicly and raise a stink.
And in 2017, the story House Republicans told aimed ridicule squarely at the REC.
“Nine years in a row, the REC forecast has been off,” said then-Rep. John Schroder (R-Mandeville).
“The REC is always wrong,” Appropriations chairman Cameron Henry (R-Metairie) stated repeatedly.
And House Appropriations called a meeting to publicly reprimand the REC’s economist, Dr. Jim Richardson, for those shortcomings. (The rest of the REC panel is comprised of the Commissioner of Administration, the Senate President and the House Speaker, who were not taken to task.) That stunk to high heaven, also.
But back to Rep. Lance Harris’ bill…
Rep. Ted James wanted to know about the five-year limitation on the proposed tax changes.
“We heard earlier how another temporary fix could affect our bond rating,” James said. “Don’t you care about that?”
“This is practicality,” Harris replied. “We need the five-year date on it to put it in the best posture to get the bill out of here and off the House floor. This is compromise.”
That’s when State Treasurer John Schroder showed up.
“I don’t think a five-year revenue bill should be a problem,” said the Republican, who was elected last fall and sworn into office in December. “The rating agencies don’t quite get it when they evaluate us. We are constitutionally required to have balanced budgets, and everything gets paid. I don’t understand why they worry about how we get there. In addition, we have the Bond Redemption Fund, which means they get paid first, even if everything goes to crap.”
“You said when you were part of this body that the REC is always wrong, and now you’re saying the credit agencies are wrong? So we are the only ones that are right?” Rep. James asked, incredulously.
“I didn’t say they’re wrong,” Schroder responded. “They like predictability, and I would argue that since this revenue goes beyond three years, that’s predictable.”
Still, the $369-million HB 27 raises is not nearly enough to solve the problem. It’s just over half of the actual shortfall of $648-million.
“You will have to make drastic cuts in health care, higher education and TOPS,” Commissioner of Administration Jay Dardenne warned. “And I don’t know why you would want to recreate this self-inflicted crisis in five years from now.”
Yet the committee approved the bill, 11-6. And it will be the only revenue-raising measure considered on the House floor today.
That stinks.
Excuses, Excuses, Excuses
“My hamster died.” “The dog ate my homework.” “The devil made me do it.” All classic – but lame – excuses. State lawmakers offered their own during the House Ways and Means committee Wednesday.
It began with committee chairman Neil Abramson, explaining for why they would not be voting on any bills.
“You can’t just show up at a special session right after a regular session and start voting on bills,” he told everyone attending the hearing. “Many of these bills were not filed until yesterday afternoon, and we need to know what these bills are and what they do. It’s not fair to begin voting today, for even though we’ve discussed similar bills on similar topics in the past, these bills may not be written the same way.”
“Then I hope you will vote tomorrow, and pass as many as possible on for full debate,” Commissioner of Administration Jay Dardenne responded, before trying to direct the panel’s attention to specific revenue-raising bills consistent with Gov. John Bel Edwards’ plan for filling in $648-million of the $1.4-billion in temporary taxes that disappears the end of June.
“HB 9 takes care of the double deduction for state income tax paid – that’s $25-million. Then there’s HB 11, which addresses the sales taxes – renewing one half-cent and cleaning the remaining four cents. The fiscal note on that is $543-million,” Dardenne stated. “And there are three bills by Rep. Jackson – HB 13, 18, and 19 – that make the ‘haircuts’ on business deductions permanent.”
“But the governor vetoed the budget,” protested committee vice-chairman Jim Morris (R-Oil City). “A lot of us felt we could come here now to raise the money, and just plug it in. Now we have to start all over. We don’t know where the money is going, and I’m not comfortable with that.”
“The House version of the budget eviscerated health care,” Dardenne replied. “And while the Senate version restored funding for health care, it cut TOPS, higher ed, and cut out SNAP benefits entirely, in addition to cutting 25-percent from all state agencies. This was not acceptable – not any version – and I expect a lot of you were actually glad it was vetoed.”
“I wasn’t,” Rep. Paula Davis (R-Baton Rouge) insisted. “I was frustrated all weekend, and I didn’t sleep well, because we had funded things and had balanced the budget. We had a starting point and we knew where we were going, and now we’re starting over.”
“That budget was 100-percent unacceptable,” the Commissioner stressed. “It contained contingencies based on money not raised. Contingency provisions are unconstitutional. And the veto is not the issue we are here to address now.”
“I feel like the governor has continued to throw the House under the bus,” Davis pouted. “Starting over is completely unnecessary.”
“So start with HB 1, and amend it as you add revenue,” Dardenne replied, reasonably.
“It hasn’t been filed yet,” Davis responded.
“True. It hasn’t,” Dardenne answered, with a hint of a knowing smile.
“Where are spending reforms in all this?” Rep. Jay Morris (R-West Monroe) wanted to know.
“You just had a regular session where you could have done those,” Dardenne answered.
“Okay, well, in that session, there were bills to expand gambling. Where does the governor stand on diverting the money from those measures to fund priorities like health care and education?” Morris asked.
“I don’t know,” Dardenne said.
“What about redirecting money we now spend on the Saints and Pelicans?” Morris asked. “Or what about the film tax credits? Instead of subsidizing Hollywood, shouldn’t we be subsidizing our priorities?”
“You all control that,” Dardenne responded. “You are the ones that legislate changes.”
“But you’re the leadership! You need to say what you want,” Morris insisted. “It looks as though the administration is just looking for money, but is unaware and unwilling to look at gambling or film credits or Medicaid fraud. We could fix this with savings from those things, but you just don’t care – or don’t want to be bothered!”
“Please point to the structural reforms in this call,” Rep. Barry Ivey (R-Central) requested.
“Cleaning the exclusions from the sales tax pennies, changing the allowance for federal excess itemized deductions, and compressing the income tax brackets are all items recommended by the Tax Reform Task Force that are included in this call,” state Revenue Secretary Kimberly Robinson responded.
“And we have tried to pass these before, correct?” Ivey asked.
“Yes, all in 2017,” Robinson agreed.
“So when we passed the temporary measures – gimmicks really – much was said about the need for structural reform. We said we would do structural reform in 2017. We did not do it,” Ivey stated. “Basically, we told the taxpayers ‘pay us now and trust us later.’ We’ve proven that we can’t be trusted. I realize why Louisiana is shaped like a boot. It’s because we are the kick-the-can state.
“On the other hand, I have seen no leadership from the governor, trying to pivot this state away from stagnation,” Ivey continued. “By that, I mean, it seems like all we’re trying to do is solve the budget hole. I don’t see how any of the proposed revenue changes will fix that. We pick on small business, we pick on the people with more money, and it seems we only exist to serve the poor. We don’t care about small business owners. We don’t care about the middle class.”
“I haven’t heard anything here other than excuses and blame the governor,” Rep. Ted James (D-Baton Rouge) admonished. “We have fiscal notes and could vote on some of these bills today. Instead, we’re blaming the governor for legislative priorities – that he gets no vote on!
“I will tell you my mindset has changed and I am willing to do some things that I hadn’t been willing to do. Previously I voted no on sales tax, but guess what? I now have my name on one of the sales tax bills,” James said emphatically. “I see a theme of change, I just see it only on one side.
“Oh – and as for the veto? There’s nothing to stop any one of us from filing the vetoed version of HB 1 and moving on from there,” James stated.
“I don’t care whether it was vetoed or not. I didn’t lose a minute of sleep,” Rep. Major Thibaut (D-New Roads) remarked, looking over at Rep. Davis for emphasis. “I think we need to get down to business, cut the rhetoric from both sides, and let’s solve the darn problem!”
The committee adjourned, however, without specifically discussing any of the bills that are the purpose of this special session. Later in the day, the agenda for Thursday’s Ways and Means meeting was posted, and – at least this time – there are twelve bills scheduled for action. They include Ways and Means chairman Abramson’s HB 3, the capital outlay bill. (And note: in this 3rd year of his chairmanship, this is the third year in a row that he has been unable to get that completed during the regular session.)
And while House Appropriations chairman Cameron Henry (R-Metairie) has yet to file HB 1 – the budget bill (wonder why?) – Speaker Pro Temp Walt Leger (D-New Orleans) took care of it for him, just in case. HB 26 is the administration’s originally proposed budget from the regular session.
Yours, Ours or Theirs: How Much?
You are getting a tax cut July first.
The question – to be answered in the current special session – is how much?
It could be $400-million statewide, or as much as $1.4-billion, which is the total amount of “temporary” tax revenue that expires on June 30.
The other question that accompanies “how much?” is “what are you willing to give up – what and who are you willing to sacrifice – in exchange?”
Governor John Bel Edwards prefers the $400-million tax cut, because it doesn’t require sacrificing health care, TOPS, SNAP benefits, state parks, or any of the other ravages of state services required by the budget he vetoed last week.
“In my opinion, and the opinion of many members – both Republicans and Democrats – that budget proposal was not worthy of the people of Louisiana,” the governor stated. “Simply put, the cuts were too deep, too wide, too catastrophic. Because it’s your healthcare, your hospitals, your loved ones who are on waivers or in nursing homes; food on your table, your TOPS, your college education.”
Governor Edwards, who departed from tradition by delivering his start-of-session speech at U-L Lafayette, rather than the state Capitol, spoke about his plan of action for this special session. Branded as #OurLouisiana, it renews half of the fifth penny of state sales tax that is expiring, cleans exemptions from the remaining pennies of state sales tax, and eliminates the double-deduction for state income taxes paid. It keeps in place the “haircuts” given in 2015 to some business tax credits and exemptions, and makes strategic cuts to state spending. In all, it replaces $648-million of the expiring revenue.
“Who wouldn’t jump at the opportunity to fully fund our partner hospitals, our medical schools, TOPS and GoGrants, corrections and law enforcement, the National Guard, higher education, the Department of Agriculture and our state parks, and at the same time reduce the tax burden on the people of Louisiana by $400-million?” the governor asked the enthusiastic crowd in attendance at the university.
While the governor hasn’t officially incorporated it into his #OurLouisiana plan, organizations that advocate for taxation fairness, such as the Louisiana Budget Project, have proposed offsetting the disproportionate impact of sales taxes on the state’s lower income population by increasing the Earned Income Tax Credit. Speaker ProTemp Walt Leger (D-New Orleans) has authored the bill (HB 6) to double the current income tax credit.
On the corporate side, the Louisiana Association of Business and Industry isn’t giving a number for the tax savings they want to see. Instead, LABI’s president, Steve Waguespack, is merely advising “proceed carefully with our fragile, service-based economy.”
In his association’s weekly newsletter, Waguespack states “Louisiana’s reliance on business taxes as a share of total state and local tax revenue is already 13th in the nation, with employers paying roughly 48 percent of all taxes in Louisiana.” And, he adds, “Louisiana desperately needs more good-paying private sector jobs and how lawmakers structure this new round of taxes will go a long way towards deciding if that can happen.”
Because…jobs.
Let’s unpack the claim of “employers paying roughly 48-percent of all taxes in Louisiana.” While it is true that businesses remit (pay) sales taxes they have collected to state and local governments, the actual payer of sales taxes is you, the consumer. At the state level, for the current year, sales taxes make up 41% of the total State General Fund (SGF) revenue.
And businesses do pay a number of property-type taxes to their local governments, most notably inventory tax. Here’s the deal though – when a business files its annual income tax return, it can claim a refundable credit from the state for those local inventory taxes paid. They get that money back, from the state – from you.
In the end, corporate taxes paid – and kept – by the state are just 3.7-percent of total SGF. That’s $350-million of the $9.588-billion total state revenue for the current budget year, which ends June 30. For the next budget year, corporate taxes paid are expected to drop down to $300-million, 3.6% of the $8.3-billion estimated SGF.
As for what LABI is willing to give up? They’re not saying, simply stating noncommittally that they “will work in good faith to help policymakers throughout this process.”
Some groups and a few legislators want the maximum amount. Their position is absolute: no taxes, period. Any taxes, they say (as they always do), will destroy jobs.
Americans for Prosperity (AFP) is the most notorious of the anti-tax advocates attempting to influence the results of the special session. It was founded and is funded by the Koch brothers (Koch Industries, Georgia-Pacific, Invista, Guardian Industries, etc.).
The only division of the Koch conglomerate actively conducting business in Louisiana currently is Georgia-Pacific. They have three facilities here: a corrugated cardboard packaging plant in West Monroe (Ouachita Parish) that employs 138; a sawmill in DeQuincy (Beauregard Parish) employing 150; and a paper plant in Port Hudson (East Baton Rouge Parish), with 907 employees (down from 1110 ten years ago). That’s a current total of 1195 employees statewide.
We can’t determine via public records how much in total taxes Georgia-Pacific pays to the state and local governments, because business property valuations, machinery and equipment valuations, and inventory taxes are not permitted to be listed on local tax assessors’ websites. They are prohibited from public disclosure. You can find out what your neighbor’s home is worth, but not a business – because “privacy”.
What we can determine is how much the Georgia-Pacific facilities have NOT paid in local property taxes, due to the Industrial Tax Exemption program. That information is publicly available from the Louisiana Department of Economic Development website. Over the past decade, school boards, sheriffs, and parish government agencies have foregone $113,481,307 in taxes from Georgia Pacific ($638,404 in Ouachita, $2,274,548 in Beauregard, and $110,568,355 in East Baton Rouge). Put another way, that’s $94,963 per job.
AFP claims to be “an organization of grassroots leaders who engage citizens in the name of limited government and free markets.” Their national goals include “repeal Obamacare”. The Louisiana chapter of the organization currently employs two people in Louisiana. They do not have their own discrete website – merely a state page on the national website, though AFP Louisiana does have a Facebook page. They have two Twitter accounts: @AFPLouisiana, which basically retweets what is written by AFP state director @JohnKayJr.
Just as they did with last year’s gasoline tax proposal, and with this year’s push for the “Louisiana Checkbook” website (they bought the web domain, by the way), AFP is waging a campaign of misinformation, i.e., “fake news”. This time they’re trying to derail the efforts to fix the fiscal cliff.
They have help from the Pelican Institute, which has been branded as a “conservative think tank” since its 2008 founding by Kevin Kane. When Kane, who was respected, passed away in 2016, the organization hired Daniel Erspamer to take over as CEO. He was formerly employed by Americans for Prosperity, in a leadership role at their national office.
AFP-LA and LABI keep touting a recent Pelican Institute “study” as “proof” that any of the tax changes proposed by the Governor, the state Senate, and concurred in by the state House, will cost the state jobs. But, as this publication’s Lamar White exposed in his article last week, their base sales tax number – from which they made all their calculations – was wrong. They began with four cents of state sales tax, instead of the current five cents, thus predetermining the results from keeping all or part of the fifth penny would become a tax increase, instead of a tax cut.
AFP was supportive of the initial House-passed budget last session, because it would have decimated the state’s health care system, thus “proving” Obamacare Medicaid expansion was a failure. They had a Pelican Institute report on that topic, as well.
In Tuesday’s run-up to the start of the session, AFP’s John Kay has harped on Twitter about #BrokenPromise, which he explains is the governor’s failure to enact permanent tax tax reform, while the “temporary taxes” were in place.
Dude, that’s not how this works. The governor doesn’t enact laws, or taxes. That’s the job of the Legislature – in this case, the Republican majority legislature, which – as we all recall – didn’t pass any tax reform bills last year, or during this year’s first special session. In particular, the Louisiana House didn’t send any of those measures to the state Senate for debates or votes.
And wasn’t it the House Republican Delegation chairman, Rep. Lance Harris (R-Alexandria), who promised in 2013 that “We will continue to work on the issue so that we can craft a responsible way to achieve our objectives in reforming the tax code in the future”?
But then again, we all know exactly what this is about (besides corporate profits), because Rep. Barry Ivey (R-Baton Rouge) spoke out on the House floor during this year’s first special session.
“Last year, I brought a package of bills that attempted to do comprehensive tax reform. Yet the Republican leadership told me, ‘We don’t want the Democratic governor re-elected, and we don’t want to give him any kind of win with tax reforms’,” Ivey said on Feb. 28. “Still, I tried and failed. And at the end of that session, I was told, ‘We aren’t going to do tax reform. We’re going to come back for a special session and renew the fifth penny’.”
And here we are, with 13 days to fix what’s been years in the making.
As the governor said, “We have a chance, and we have a choice. This isn’t about me – it’s about all of us. This is our Louisiana, and our people and our state are worth fighting for.”
You are getting a tax cut. Will it be just yours, theirs, or ours?
Spinning Straw Men Into Fool’s Gold
They think we are fools. They – the House Republican Delegation – think we – the people of Louisiana, the voters, their constituents – will believe they have “saved” us by agreeing to a budget that cuts every agency of state government by 24-percent, except for the Louisiana Department of Health.
How do we know this is what they think?
They said so.
“Throughout this entire process, the House of Representatives have done our job, have held the line, and saved the people of this state,” declared House Republican Caucus leader Lance Harris, at a press conference immediately following the House vote to concur in the Senate’s changes to the budget bill, HB 1.
This is the House majority leadership, the same group that put together a budget reducing funding for LDH by a total of $1.6-billion dollars on April 19th. That House budget bill is what prompted the closure and layoff notices from public-private partner hospitals, and it required notifying nursing home residents and disabilities waiver participants that they could be losing their eligibility.
Viewing that as utterly unacceptable, the Louisiana Senate re-crafted the budget and fully funded health care and the hospitals. The only way to do so, and keep spending balanced with revenue, was to slash 24% or the resources allocated to every other agency, department and branch of state government.
It was an object lesson for the House leadership, to illustrate “the seriousness” of the budget crisis.
“It will shut everything down,” Senate Finance chairman Eric LaFleur acknowledged. “But the House didn’t give us any options.”
That’s not how House leadership told the tale, once the full House, on a 61-37 vote, agreed to go along with the Senate’s budget version.
“The administration had chosen to make the elderly their least priority,” Appropriations chairman Cameron Henry stated. “We just chose to make it our highest.”
There’s so much “spin” packed into that statement, it’s a wonder you’re not too dizzy to keep reading.
Blaming the administration, i.e., the governor, is part of this group’s standard narrative. But as for their choosing to make the elderly – and disabled – their “highest priority”? It’s a blatant falsehood.
If there was any truth to that statement, the Appropriations committee would not have reduced the time available on the single public testimony day by four hours – when previous Appropriations committees usually devoted two full days to hearing public testimony.
And during the budget concurrence discussion on the House floor Thursday, Rep. Kenny Havard (R-Jackson) inadvertently revealed the scorn he and many of his fellow party members have for members of the public who are required, year-after-year, to beg for funding for their life-preserving services.
“If we vote for this, does that mean we’re not going to have to watch the parade of hospitals asking for more money, or hear waiver people telling their sob stories from here on out?” Havard asked.
In the post-concurrence press conference, Henry – less bluntly – indicated his disdain, as well.
“LDH is fully funded and the people that depend on those services don’t have to worry about all that and come calling,” he said. “Sheriffs, DAs, DCFS will come calling, but that’s a different perspective, compared to nursing homes, waivers, things of that nature, where – obviously – everything is, um, personal.”
Throughout Thursday’s budget debate, and during the press conference afterward, the Appropriations chairman displayed a cavalier attitude toward the effects of defunding so much of state government. That’s because this fits perfectly into the Republican mantra of “reducing the size of government.”
“These 24-percent cuts – are we really that fat?” asked Rep. Sam Jones (D-Franklin).
“The Senate resolution says if we pass revenue, they get their funding back,” Henry replied.
“And you’re telling us it will be okay?” Jones asked.
“We’re all being treated equally,” Henry equivocated.
When reporters later asked about specific shortages, Henry remained nonchalant.
“There are only about seven agencies whose budgets are less, under the budget we just passed, than they actually spent in 2017,” Henry said.
Let’s take a moment and unpack that statement. The Appropriations chairman is not comparing the next budget to the current one – he’s comparing it to the prior year’s budget –the one that ended June 30, 2017. If you recall, that was the year TOPS was cut by 30%, and a special session was needed to close a $304-million mid-year budget shortfall. It also required tapping into the Rainy Day Fund.
What will the FY 19 budget do? According to the Division of Administration analysis presented to all members of the Senate and House:
The Louisiana School for the Deaf and the Louisiana School for Math Science and the Arts would close at their mid-year break.
Louisiana Public Broadcasting would go off the air New Year’s Day.
State parks and historic sites would close completely.
State veterans’ cemeteries will close.
All 27 forest fire substations will close.
11,500 of the 15,965 state prisoners housed in local jails would be furloughed – put back on the streets without supervision.
Even though the federal government pays 100% of SNAP (food stamp) benefits, Louisiana would become the only state without a SNAP program, since the state-required funding to administer the program is eliminated.
And the Secretary of State won’t have enough money to pay for this fall’s elections – which include voting on congressional representatives.
The state court system is cut 24%, as well, and might just not hold hearings and trials for 3 months out of the year.
The legislature also loses 24% of its funding, which would – of course – prevent holding yet another special session to deal with any other budget shortfalls.
Henry does not want you to find this out, especially not from Gov. John Bel Edwards.
“Hopefully, the governor won’t continue the fear-mongering as he has in the past,” he said.
And while the Appropriations chairman has said he is now amenable to raising some additional revenue to fill the budget holes, he is insistent $649-million is NOT the target number. He and the House GOP Caucus have stuck to $495-million as their calculated shortfall amount, but have never explained how they arrived at that figure. They don’t even intend to shoot for that figure during the special session that begins next week.
“Members are going home to see if their constituents’ will is to say we need that dollar amount,” Henry states. “The Senate has given us a good breakdown, and if we raise $313-million, I imagine it will look something like the Senate did. But I think we’ll probably put a little bit more toward TOPS – about $88-million there.”
So their story goes like this: the governor made this mess, the House Republicans saved you from it, and they’re going to fix things during this next special session.
Sure.
That’s pyrite — fool’s gold – and it is worth exactly as much as the promise Lance Harris made, after then-Governor Bobby Jindal withdrew his plan to eliminate state income taxes – a plan which Rep. Lance Harris enthusiastically supported.
“While repeal is off the table for this legislative session, we will continue to work on the issue so that we can craft a responsible way to achieve our objectives in reforming the tax code in the future,” Harris said, on April 16, 2013.
There have been ten legislative sessions since then. And where are the reforms to the tax code?