Financial Fiasco Continues

House-passed bills designed to increase tax revenue for next fiscal year will be heard in Senate Revenue and Fiscal Affairs Committee next Monday morning (click here to view the agenda). The full House will debate and is expected to pass the state’s operating budget (HB 1 by Rep. Jim Fannin, R-Jonesboro) next Thursday, May 21. As the fiscal mess heads to the Senate for additional deliberation one thing continues to become clear: whatever passes this year is paving the way for a special session early next year to fundamentally reform the way state government is funded. In conversations with legislative leaders it is obvious that Louisiana’s tax code needs to be improved in a way that is fairer and more predictable for corporate and individual taxpayers. The major gubernatorial candidates are also echoing that forex sentiment.

Senate President John Alario, R-Westwego, was quoted this week in the Baton Rouge Advocate, saying “fixing the state’s long-term structural deficit is not possible this session because of the strict rules laid down by Gov. Jindal against allowing a net tax increase.” Alario said he will “continue trying to craft a short-term fix to lead to more permanent solutions after the statewide elections, when a new governor and Legislature take office in January.”

Louisiana Association of Business and Industry (LABI) President Stephen Waguespack this week said in an interview that last week’s House-passed tax increase cleared the floor with only a majority vote, rather than a two-thirds vote, and that majority vote can be legally challenged (see article here). In the same article, state Treasurer John Kennedy, R-Madisonville, was highlighted for telling a Monroe Chamber of Commerce luncheon audience that he also believes the package of tax bills passed in the House last week is unconstitutional. Kennedy, who taught constitutional law at LSU for 10 years, said it was clear to him that the Constitution requires a two-thirds vote to increases taxes. He said, “If somebody files suit challenging it, he or she would win in court.”

Despite assertions that the House-passed revenue increases were passed unconstitutionally from the House floor, the House Committee on Appropriations earlier this week reported HB 1 favorably. The committee did so with the understanding that the budget would be funded through the nearly $700 million contained in the package of House-passed tax bills. The committee also reduced spending on state contracts, cut money for vacant jobs and made other minor reductions to free up a few million dollars for other programs. Legislative leadership said the changes are enough to offset cuts to higher education but that nearly $200 million more in funding is necessary to patch the state’s healthcare spending gap.

View committee schedule for the week here. Only committees which have AIA-tracked bills on the agenda have been included.