Gov. John Bel Edwards is proposing to increase the sales tax by 20 percent on April 1 to get the state’s immediate budget crisis under control. He also wants to tap the state “rainy day” fund and use money from the BP oil spill settlement to help close an immediate $750 million budget deficit at the state level.
Edwards made other recommendations, including another tobacco tax hike and a return to higher income taxes, to ensure long-term financial stability. But those new taxes would not go into effect for a few months, under Edwards’ plan.
Edwards is suggesting a full boat of tax increases to fix the state’s $750 million midyear budget deficit, but $488 million of what he’s suggesting is the same one-time money Democrats and others have been screaming about for years. They never shut up about it when Bobby Jindal was the governor, but here is Edwards proposing the exact same fix we always see. He wants to take $200 million from the BP settlement, which is the definition of one-time money, he wants to tap the Rainy Day fund for $128 million, and that’s one-time money, and he’s suggesting a 10 percent cut to the budgets of state programs funded by statutorily dedicated funds to sweep another $160 million into the state’s general fund.
This is precisely the same stuff Bobby Jindal did every year, and he was called out, rightly in some cases, for mismanagement of the state’s budget.
The fact that these things are possible, that the state has all these pockets of money which materialize every time there’s a budget shortfall, is a good indication of why Louisiana is such a fiscal basket case; most of those pockets shouldn’t exist and most of those dedications shouldn’t exist – or if they should, the taxes which create these surpluses all over the place that must be tapped to refill the general fund ought to be cut so that money can stay in the private sector where it will be used more efficiently.
But Jindal’s great sin was in not loudly and clearly explaining the structural deficiencies of Louisiana’s public fisc, not his constant repurposing of these little pockets of money in a scramble to balance the budget. Edwards, who voted for five of the eight budgets the legislature passed and Jindal signed over the two terms he was in office, is now validating Jindal’s actions after screaming bloody murder about them for years.
It’s entertaining to see that Edwards, now that he’s in office, has to offer the same solutions he castigated Jindal for all those years.
So here’s the plan the Republicans in the legislature should follow: do nothing. Don’t respond to Edwards’ call for a special session starting Feb. 14 when he issues it. Reject the call and wait for the regular session when it starts March 7. The three one-time money ideas he’s proposing are just as viable in two months as they are now, even to the extent Edwards actually needs the legislature to pass bills signing off on them.
Because Edwards’ one-time money usage, which makes the current budget deficit $262 million, obviates the need for the big tax increases he wants. Let him go back to the drawing board and find the rest of the $262 million in cuts.
The good news is that $262 million will be cuts that are bankable; in other words, you don’t have to restore them, and if they’re midyear cuts you can get even more out of them over an entire year. If he’s making a midyear cut of $262 million that might be, say, $524 million over a whole year. So if $1.9 billion is the number for next’s year’s deficit, you’ve just shrunk that down to $1.4 billion. Bank his cuts to the statutorily dedicated funds, and that might get you another $320 million, getting you close to the $1 billion mark.
Make Edwards do the work. There aren’t too many of the sacred cows in the state’s budget which primarily benefit Republicans or their constituents; it’s not like the state’s navy will get mothballed.
Accepting Edwards’ call means accepting the proposition he’s going to balance the budget with tax increases. That’s a bad idea; the state’s private sector economy is teetering on the brink right now and can’t afford massive tax increases, and it especially can’t afford those increases to support a leviathan public sector which has been a massive burden since Huey Long was elected governor and doesn’t even provide quality services to its customers.
Louisiana spends some $25 billion a year, a figure which on a per capita basis blows away any other state in the South, and takes in about $23 billion a year. And with an economy on its back because the oil and gas industry is in hibernation, there is no way to get $25 billion. Period. It’s not going to happen. Try to raise those taxes, and you’re going to end up raising Texas, because that’s where the jobs and capital will go. You will never get the revenue you project.
And the Republicans in the legislature will not be rewarded by their constituents for failing to understand this. If you disagree, then explain why Darrell Ourso, who won a special election before the 2015 regular session began and proceeded to vote for $700 million in new taxes, is not currently in the legislature despite his earnest desire to remain.
Voters in Republican districts didn’t vote Republican legislators into office to raise taxes. And those legislators are under no obligation to make John Bel Edwards a success as governor by letting Edwards reward Democrats with taxpayer money for a large public sector at the expense of Republican taxpayers.
Or, for that matter, Democrat taxpayers. One of Edwards’ tax proposals is to raise the state sales tax from four percent to five, and eliminating a number of exemptions to it. Were that to pass there would be lots of poor people paying an extra penny they can’t afford; assumedly those poor people are Democrats, so fighting a state sales tax increase which would make Louisiana the nation’s highest sales tax state is a service to Democrat voters as well as Republicans.
Just say no to the special session. Make the governor negotiate against himself for those tax increases he wants. Out of necessity, he might just develop a talent for fiscal discipline commensurate with his criticisms of Jindal over the past eight years.