Last Modified: Sunday, January 03, 2016 7:02 AM
A disturbing reality has set in even before Gov.-elect John Bel Edwards takes the oath of office on Jan. 11. The budget for the current fiscal year is coming up some $1 billion short of what is needed to pay the state’s bills, and the budget for the new year beginning July 1 is short by $1.9 billion.
Lt. Gov. Jay Dardenne, who will become Edwards’ state commissioner of administration and chief budget officer, laid out the cold, hard facts at a mid-week news conference.
“We knew the budget was a mess, but it wasn’t quite as dramatic as we’re now finding out,” Dardenne said.
Declining corporate and sales taxes, falling oil prices, a more expensive Medicaid budget, expected payments not showing up and higher costs for public schools and the TOPS scholarship program have complicated the financial picture.
Then came that disturbing reality about what it will take to fix the problems.
“It’ll be very difficult to do without having some sources of new revenue,” Dardenne said.
Dardenne was the only major candidate in the gubernatorial campaign who said he wouldn’t take taxes off the table as a possible solution to budget shortfalls. However, he said they would be a last resort and would be avoided if possible. Edwards and the others said they didn’t think increased taxes were necessary.
As you would expect, there are many out there who are quick to remind the incoming governor of his campaign statement about taxes. And the uproar is destined to continue.
Unfortunately, there appears to be no way the budget problems can be resolved without including higher taxes among the solutions.
What voters and taxpayers need to be reminded of constantly is how the state got into this royal financial mess.
Chris Odinet, an assistant professor at the Southern University Law Center, laid out his analysis in an opinion piece for The Times-Picayune.
“… Louisiana’s budgets over the past eight years have been held together with duct tape. Year after year the state’s budget has been built on gimmicks and imaginative accounting… Funds contingent on the sale of surplus state properties, money generated from future tax amnesty programs and higher-ed tax credits that no one gets and no one understands served as prominent ornaments on the sad and flimsy tree that has been our state budget,” Odinet said.
Dardenne addressed those issues when he said, “We are going to speak the truth, frankly and boldly. We are ending the era of gimmicks and trickery. We’re blowing away the smoke and breaking the mirrors regarding the state budget.”
Others talk about how that has to be done. Robert Travis Scott, president of the nonpartisan Public Affairs Research Council of Louisiana, said the immediate goal is to balance the books.
“One thing that is clear to us is that one solution is not going to close the gap,” he told The Advocate. “There’s not just one big cut you can make; there’s not just one big revenue stream you can create to close this gap. The best way is to close it and take a little (revenue) from various places.”
The Louisiana Association of Business and Industry told its members, “Raising revenue (taxes) is often discussed as a silver bullet. However, if cost containment is not part of the equation, lawmakers will be pressed to raise revenue year after year to fund the ever-growing needs of state and local government.”
Barry Erwin, president of the Council for a Better Louisiana, said raising revenue has to come with a better tax structure. He said that makes it possible for the business community to be competitive and simplifies things for taxpayers.
The Advocate said solutions suggested so far include increasing cigarette taxes, removing the remaining 3-cent sales tax exemption on the purchase of utilities by businesses, adding a charge on motor fuel taxes, adjusting income tax rates, raising the state sales tax by a penny and eliminating the federal income tax deduction on state income taxes and some other tax breaks.
Another penny state sales tax would raise about $750 million and eliminating the federal income tax deduction would save about $735 million.
Repeal in 2008 of the income tax portion of the 2002 Stelly Plan is costing the state about $800 million a year, which came about the same time as the 2008 national recession. Those higher income tax rates could be restored, but it would definitely create a firestorm among some of the most vocal tax opponents in the state.
Gov. Bobby Jindal didn’t favor repeal, but he caved in when he saw how the public winds were blowing. A number of Stelly Plan opponents have since acknowledged that repeal wasn’t a fiscally sound move.
None of the tax ideas are popular, but some taxpayers seem to understand the need to take bold steps.
“Tax and spend is a lot more sustainable than don’t tax, sell everything off and spend. It’s pretty basic math,” said one reader of The Advocate.
Others talked about cutting government jobs, but one reader wanted to know which jobs they would cut.
“What positions are those? Teachers, police officers, firefighters, bus drivers, the people who work at the DMV, the guys who fix the potholes in streets?” asked one reader.
The toughest job facing Edwards and Dardenne is to convince a Legislature that is controlled by Republicans that higher taxes are necessary. Most members are veteran lawmakers, and they have agreed in the past with Jindal, who continues to insist higher taxes aren’t the answer.
I hope to have a front row seat for that debate.