Thursday, July 18, 2024

House committee passes bill that raises some but not all of revenue to close budget gap

by BIZ. Staff
By Kaylee Poche and Tryfon Boukouvidis, LSU Manship School News Service

BATON ROUGE — The House Ways and Means Committee voted 11-6 Thursday to advance a Republican bill that would raise $369 million in additional revenue next year —$279 million less than state officials say they would need to cover a projected budget shortfall.

The bill, written by Rep. Lance Harris, R-Alexandria, would extend one-third of the penny of sales tax that is set to expire this summer and include budget cuts to reduce the size of state government.

Harris, the chairman of the Louisiana Republican Legislative Delegation, argued that the budget gap is likely to be about $495 million and that state agencies would face only a 1.3 percent cut in funding on average.

But the state’s Revenue Estimating Conference projects that the shortfall will be $648 million, and Jay Dardenne, a top official in Gov. John Bel Edwards’ administration, said Harris’ bill would require much more “dramatic reductions” in higher education and state health services than Harris acknowledged.

“When you do that, you’re going to find it’s not going to be as easy as it’s being presented today with just a one percent cut,” Dardenne said.

The vote on Harris’ proposal came after the committee rejected, also 11-6, a bill that the governor supported that would have extended a half of the penny of sales tax and taken other steps to raise $547 million in additional revenue, reducing the shortfall to $101 million.

The votes, on the third day of a special session called to solve the fiscal problems, sent only the Harris bill to the House floor and left Democrats seeking reconsideration of the governor’s proposal.

A majority of the House members are Republicans, but they are deeply divided on tax issues and must make a deal with Democrats to put together the two-thirds vote needed to pass any revenue measures.

An earlier effort to solve the budget gap collapsed in March when 27 of the 61 House Republicans and several Democrats in the Louisiana Legislative Black Caucus refused to vote for any increase in the sales tax.

Democrats said Thursday that if the House passes Harris’ bill, the governor will turn to the Senate to try to increase the sales tax extension to half a penny and make other changes to raise more revenue and reduce the size of any budget cuts.

Also in question Thursday was how long any extension of the sales tax should last. Harris suggested five years, while the bill with the governor’s proposals, authored by Rep. Terry Landry, D-New Iberia, would have extended the half cent permanently.

The third bill, authored by Rep. Kenny Havard, R-St. Francisville, would have permanently extended a third of a cent of the sales tax. It also was rejected by the committee.

Another difference among the bills was the rate at which business utilities would be taxed. Harris’ bill would have taxed business utilities at 2 percent, while Landry’s bill would have retained the current tax on business utilities at 4 percent, with the exception of 2 percent for major manufacturing and industrial uses.

Both would have removed similar sales tax exemptions for businesses.

Harris said he brought the bill because he thought it would have the best chance of moving forward.

“It has nothing to do with what I want or the governor wants,” Harris said.

Chris Keaton, a budget analyst with the House Fiscal Division, said that basically the difference in the estimates of the project shortfall is that they were based on two different points in time.

But other officials said that the Legislature needs to use the official state revenue estimates.

Harris also said he would not be flexible in raising additional revenue with his bill, a compromise likely necessary to acquire votes from Democrats and some members of the Senate.

Harris, who traditionally opposes raising taxes, argued that him bringing the bill forward was a compromise in itself.

Ron Henson, the first assistant treasurer of Louisiana, argued that temporary revenue-raising measures hurt the state’s bond rating. When a bond rating is downgraded, the markets are less trustful to the state and the cost of borrowing money increases.

The meeting, which lasted over five hours, reflected the tensions carried over from the special session that collapsed in March.

“This is a fabricated political problem, and the people of Louisiana are caught in the middle of it,” Rep. Barry Ivey, R-Central, said. “Games have been played by both sides for two and a half years.”

“I do not lay the fiscal crisis that we entered in in 2016 on this administration,” he said. Referring to tax and budget cuts by former Republican Governor Bobby Jindal, Ivey added: “We walked into it because of the past administration.”

And he said, in reference to his fellow lawmakers, “We haven’t done anything responsibly to deal with it.”

When Rep. Julie Stokes, R-Kenner, started to talk about a similar revenue bill that she had once proposed, she was interrupted by the committee’s vice chairman, Jim Morris, R-Oil City, who complained that he wanted to “stick to the agenda.”

“If people want to ask questions that go to those specifics of this bill, I’ll sit here with them ‘til the cows come home,” Morris said. “But I’m not gonna sit in here today and continue to listen to a bunch of political speeches. It’s just not gonna happen.”

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