News yesterday that the White House has agreed to a Major Disaster Declaration for Louisiana might well put a damper on the possibility that Gov. John Bel Edwards will demand a special session to get a tax increase out of the people of the state, but it certainly doesn’t destroy that possibility. It simply converts a sure thing to a strong likelihood.
How much money will the state get from the federal government thanks to the Major Disaster Declaration?
Louisiana state government has more than $71 million in response to the COVID-19 pandemic and is asking the federal government to fully reimburse all expenses as the state plans to spend more money to build new facilities that will house coronavirus patients.
According to the Advocate, Commissioner of Administration Jay Dardenne said Tuesday much of the cost stems from the Governor’s Office of Homeland Security and Emergency Preparedness.
So far the virus has infected almost 1400 people and killed 46. Governor John Bel Edwards requested this week that the White House declare the outbreak in Louisiana a major disaster saying the state has overwhelmed its stocks of key resources used by hospitals, first responders and emergency managers.
Should the White House grant the declaration, Louisiana would qualify for a full reimbursement of all cost spend on COVID-19 response, according to Dardenne.
The state is looking for facilities to house people who test positive for coronavirus but isn’t necessarily sick enough to need hospitalization at an existing hospital. These facilities would allow hospitals to free up more beds for patients that need them.
Dardenne says more than $51 million of the total amount spent went towards supplies, including an extensive list of personal protection items for hospitals and other goods.
The Louisiana Department of Heath has spent close to $7.5 million. The Board of Regents, which oversees colleges and universities, lost approximately $16 million in revenue partly due to lost fees from students but has spent more than $1 million in response to the pandemic.
Dardenne’s office, the division of Administration, has spent over $1 million in acquiring computers and other necessities needed for state workers to work from home.
Yesterday, when Sen. John Kennedy wrote a letter to the President asking for the declaration, he didn’t put a number on the request, simply noting that “100 percent federal funding” of emergency work under the Stafford Act is what’s being asked for.
Which would mean the feds will pick up $71 million, and counting, of the state’s cost.
But that’s not why Edwards is likely to demand a special session when this is over.
Remember the controversy over the REC forecast? It seems so long ago, doesn’t it? It was just six weeks ago. Edwards was demanding that the Revenue Estimating Committee approve a rosy-as-can-be budget forecast so he could put together the mother of all spending orgies, and he didn’t get it. Instead, he had $100 million less to spend than he wanted, and Edwards and his Commissioner of Administration Jay Dardenne ran around whining about it.
That was before the bottom fell out of oil prices. In February it was realistic that oil could be $50 for the purpose of calculating Louisiana’s severance tax revenue, The REC actually pegged it at $57 for this year’s budget.
That isn’t realistic any more. Louisiana Light crude is trading at $22.83 as of this writing today, and there is zero end in sight to the price war the Saudis and Russians touched off a month or so ago. Oil and gas in Louisiana is quite possibly on its last legs, and the nationwide economic shutdown has cratered the demand. It’s going to take months, if not years, to clear the glut. And remember, the old rule is that for every dollar the price of oil goes up or down, it’s $11 million in increased or decreased revenue to the state.
If you’ll remember the “Fiscal Cliff” Edwards screamed about when he took office at the beginning of 2016, that was brought on largely by a collapse in oil prices. Well, at about a $34 drop in oil prices from the REC forecast you’re looking at a nearly $400 million falloff in state revenues.
Not to mention the rest of the economic activity this shutdown has killed. We’re doing some basic math here, but two years ago when the Legislature was debating an 0.45 cent state sales tax increase to replace the one-cent sales tax that had gone off the books, the revenue figure given for that was on the order of $450 million. That would indicate the state take from sales tax revenues goes about $4.5 billion. It’s not unreasonable to figure Louisiana’s sales tax revenues will be off a good 10 percent, which would make for a $450 million shortfall there.
Then you have income taxes, which will be off. All kinds of other business taxes, which will be off.
Don’t be surprised if Edwards starts talking about a billion-dollar shortfall for the FY2021, which must be addressed with a tax increase. The current fiscal year, where the real falloff is happening, is three-quarters finished, so the revenue loss won’t be all that bad and the state was set to have something of a surplus anyway.
But starting in July, when you have restaurants and retail locations which went out of business because they couldn’t survive a month without revenue, and when tourism in New Orleans suffers a pretty permanent falloff because everybody knows it was a hub of Wuhan virus activity, and when people who were dead broke from Louisiana’s lousy economy before any of this began and are now doubly so join the tens of thousands of others leaving the state, that FY 2021 picture is going to be pretty bleak.
All John Bel Edwards has is a hammer. To him everything looks like a nail. He’s going to demand a tax increase. And the compliant legacy media in the state will echo his screams, howling about how Louisiana’s essential, basic services can’t continue unless Edwards’ demands are met.
You need a two-thirds majority for a tax increase in the Louisiana legislature, and the state’s voters just elected the most conservative House and Senate in its history last fall. Finding a supermajority for a tax increase for any purpose is going to be pretty close to impossible. And yet it’s coming.
When the Legislature goes back to work to resume the 2020 regular session, no tax increases will be on the table; it’s not a fiscal session. But Edwards is going to demand a special session as soon as this one ends, and we already know his tactic is to keep calling special sessions until the Legislature wears down and gives him what he wants. Those legislators are ordinary folks, by the way, and they’ve all lost lots of income due to the shutdown. Keeping them in special session after special session will exacerbate their financial problems.
Yes, nobody cares about the problems of politicians. We’re not pointing this out to be sympathetic. What we’re saying is Edwards is likely going to think he has the leges by the short-hairs and he can use that leverage on them to get a tax increase from you.
We’re not saying he’ll succeed. We are saying a massive political brawl is coming. The only thing which will avert it is a billion-dollar flood of federal dollars coming into the Louisiana treasury before the end of the current legislative session, and while aid is probable at some point it might not hit before the beginning of the next fiscal year.