“…the Task Force believes that one structural change in the Louisiana budgetary model should be to live within long-term and sustainable budgetary trends as opposed to over-reacting to short‐term and possibly unsustainable surges in revenues.”
– Task Force on Structural Changes in Budget and Tax Policy, May, 2016
As a condition precedent to the passage of short term taxes during the First Extraordinary Session of 2016, the Legislature insisted that there be formed an independent task force charged with reviewing and making recommendations on tax policy, revenue options, and structural spending initiatives. The expectation was that the Task Force would accomplish its work by the Fall of 2016, in time for a Fiscal Session in the Spring of 2017.
The Governor, in an effort to support his drive for raising taxes in a special session immediately following the 2016 Regular Session, has pressured the Task Force to issue a preliminary report only on tax issues.
The Task Force initially resisted his demand but in the end it compiled a preliminary report. This report is very broad and covers only areas that are mainly well known. Interestingly, many of the included suggestions had already been rejected by the House in the first Special Session.
In a classic case of never ask a question that you don’t know the answer to, the Task Force makes it clear that the Governor’s strategy may be premature and that there exists a substantial number of Legislators who feel that raising taxes without a full understanding of the impact of the tax increases from the first Special Session would be folly.
In the statement quoted above, the Task Force also makes it very clear that the state’s budget policies must be long term and sustainable. The state must stop budgeting based upon a “surge” of unsustainable revenue such as that created by taxes designed to sustain existing spending, just because it is existing spending. Such a surge may well have been created by the actions taken in the Special Session, but it will be some time before that is known. It that potential of a surge that causes much angst within the ranks of legislators.
Further confounding the Governor’s intent in having the Task Force issue a preliminary report, the Task Force states that in the case of a surge, excess funds should be dedicated to specific non-recurring expenses. From his statements it is clear that the Governor has no such intention. Instead his stated goals are to develop substantial new revenues to sustain all the recurring expenses and programs that the state already has on the books and to expand others, such as Medicaid.
Ironically, there has been no indication from the Governor that he has given thought to developing a capital outlay strategy to address our state’s truly desperate needs. In fact such a strategy may well be precluded by the results of a second Special Session creating massive new taxes just to feed recurring expenses. The unintended consequence may be that the raising of new taxes may well destroy any public desire to allow the Legislature to address the state’s capital needs. The old expression applies; “you can’t get blood out of a turnip!”
The Task Force goes on to suggest that the state place a limit upon recurring spending for 2017 and 2018. This only makes sense as we wait to determine the results of the first Special Session, as well as the much hoped for end to the recession that we find ourselves immersed in.
In the closing paragraph of the report the Task Force subtly highlights it’s underlying concerns with the results of revenue raising from a second Special Session when it cautions that the Legislature may want to consider time limiting any tax changes resulting there from.
I am certain that the Governor did not expect nor was he overly happy about the unqualified warning that the Task Force issued in its report. Louisiana needs structural changes to its revenue policies and, at the same time, to its spending policies. Short of devastating tax increases, tax increases that in the face of the current statewide recession would assure economic decline, the long term revenue picture offers no sign of substantial growth.
Therefore, we must be careful to accept the policies outlined by the Task Force report and temper our spending within the limits of reasonably expected revenue. Anything other than living within our means offers no hope for a future in which we can support state services and at the same time grow our state’s economy.
Only by growing our economy can we serve the long term needs of the citizens of Louisiana. Building the state’s fiscal basis on tax surges without true structural change through tax reform and spending reform only locks us in to living hand to mouth and assures long term economic failure.