Here’s How The Special Session Is Expected To End…

The Monroe News Star’s Greg Hilburn has a report that largely conforms to what we’re hearing about what the Louisiana legislature will finish the special session with tonight…

The deal is far from a sure thing, but a 6 p.m. deadline today looms to avoid deep cuts to higher education and healthcare.

House Democratic Caucus Chairman Gene Reynolds and Republican Rep. Jay Morris of Monroe confirmed the components of the deal.

“It’s the most tenuous of deals, but that’s where we stand,” Reynolds said.

The most fragile component is adding a quarter-cent to the new penny of sales tax that has already cleared both chambers, which the Democrats have vehemently opposed. It appears clearing the existing 4 cents of sales tax of exemptions has the most traction.

“I think, as of this minute — no, this moment — the most solid part of the deal is leaving the four existing pennies of sales tax clean,” Reynolds said. “I’m not sure it can even be characterized as a deal.”

House Speaker Taylor Barras, R-New Iberia, recessed the House until 1 p.m. to negotiate a final deal. He identified three bills — House Bill 61 (removing exemptions from the 4 cents of existing sales tax), House Bill 62 (the additional penny of sales tax) and House Bill 122 (supplemental cuts) — to watch.

The math on “cleaning pennies” of sales tax goes like this – over the course of a year, removing all exemptions save the constitutional ones on prescription drugs and groceries nets about $100 million per year per penny. That means to close the mid-year deficit, cleaning each penny would net about $25 million. So to clean all four pennies would close $100 million toward what has been pegged at about a $150 million remaining deficit for the 2015-16 budget. Most of the remaining deficit could be covered by tacking on an additional 0.25 cents to the state sales tax, as has been suggested by House leaders with cover from LABI and the Louisiana Chemical Association, among other business trade groups; the one cent sales tax increase was said to produce $210 million for the current budget, so an additional quarter of a penny would provide some $50 million.

That’s if you make a static projection. You’ll never get as much revenue as you project from a tax increase.

And therefore, the supplemental cuts would likely need to be employed to insure a balanced budget.

Nobody will like this solution very much. As we saw yesterday, the leftists on the Senate Revenue and Fiscal Affairs committee laid an ambush for LABI president Stephen Waguespack yesterday over the question of the additional 0.25 cent sales tax increase and his objection to cleaning all four pennies of exemptions. That they might have to support his solution at the end of the day won’t be very palatable to them and their legislative allies.

And the House Republicans who swallowed hard to accept the additional penny in the first place are going to struggle with any more tax increases. They didn’t run on raising taxes at all, much less raising them repeatedly. Cleaning pennies, which will result in higher business taxes, will be even worse for them.

So this will be tough on both sides.

Then there is the question of duration, because the House was not and, we’re told, is not on board with the idea of any of these increases lasting past the 2019 election. The Senate passed the one-cent sales tax increase as a five-year measure, which isn’t acceptable. The House members we’ve talked to say there will not be 70 votes or anything close to that number for any tax increases lasting longer than 18 months, but it could be that they’ll bend for a three-year timeframe should push come to shove.

We’ll begin to find out how it ends this afternoon, and by tonight we’ll know the answer.

But as we’ve said before, whatever revenue this session results in will be all that Gov. John Bel Edwards and his legislative allies will get for now, because the regular session which starts next week is not a fiscal session and no tax bills can be brought in it. So if there is a deficit to be resolved, it will have to come courtesy of budget cuts or restructuring of state government. And that’s why however this midyear deficit is resolved, you’re likely to see Edwards react with bitter disappointment and acrimony against what he will call “irresponsible” legislators.

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