It’s not so much that revenues from
the state’s excise tax on extracted oil comprise a large part of the state’s
budget – the 12.5 percent levy’s proceeds making up about a fifth of budgeted
revenues – but that a shortfall can be spread only around a limited portion of
the entire budget. When last year voters unwisely locked in reimbursement rates
for nursing homes and hospitals and cordoned off tens of millions of dollars to
build artificial reefs until the end of time and still never could spend it all,
that put over 80 percent of the budget off limits to reductions in the normal
budgeting process for next fiscal year (most of this money could be touched if
a budget adjustment during a fiscal year would occur with supermajority
legislative approval). This means for FY 2016 one area is set up most for
reductions, higher education, and another somewhat so, what has been left
unprotected in health care.
The latter, since its levels of
expenditures are the largest in the budget, presents an opportunity to cut with
the pain most spread out, even after a few hundred million bucks got removed
from the equation with the vote last fall. However, it lately has borne
mid-year cuts when necessary, and another unfortunate development new to the
calculus is that the Patient Protection and Affordable Care Act, in order to
create the ruse
that it actually was not going to cost the country extravagantly, dramatically
has lowered its temporarily boosted reimbursement rates for Medicaid to doctors.
The state holding back even more from the rate only would compound the impact
of lower quality care through greater wait times and increased costs by pushing
recipients to emergency rooms.
Higher education, by contrast, has
a safety valve to make up for any cuts – increasing tuition and fees. With
generous federal financial aid in terms of loans and grants, the Taylor
Opportunity Program for Students paying for about a fifth of all full-time
college students, and with plenty of ability to pay as
Louisiana’s tuition rates are fourth-lowest among the states and District
of Columbia with per capita income
several slots higher, that can go higher by law as much as ten percent if the
institutions meet performance targets. But that only serves as a limited
buffer; this
year, $1.367 billion was budgeted for institutions’ self-generated revenue
and the cuts for next year are figured to be in the range of $300-400 million.
An additional $200 million cut here, because of the smaller scale of spending
as compared to health care, would reduce the state’s contribution by almost 20
percent and the total budgeted by almost 10 percent.
True, the system is overbuilt with
too many institutions chasing too few students, but even if some campuses
stopped operating entirely on Jul. 1, meaningful savings would accrue only
after time passed and would not contribute much to the state’s bottom line. And
on the health care side of things, one fool’s gold tactic, expansion of
Medicaid, won’t help out much either in the short term, for while the state
would pocket the roughly 38 percent difference in reimbursement rates as
compared to regular Medicaid for this upcoming year, the problems from the rate
cut would magnify still more, the difference would make up just a portion of
the predicted shortfall, and it sets up the state for extraordinarily
escalating costs starting in 2020.
On the revenue column of the
ledger, with confirmation approaching in a couple of weeks, outside of the severance
tax it seems they may come in a bit higher. Still, including that tax and
considering the realism and wisdom of where cuts can be made (keeping in mind
other significant revenues holes exist already that may not be fillable through
the usual exercise of funds sweeps, such as the end of the latest tax amnesty
program), it will be difficult to close the gap without making structural changes
to the revenue-generating component.
The obvious path to take here is dealing
with tax exceptions, with the king of wastefulness (with the solar
and wind tax credit programs now on their way out) going to the Motion
Picture Investor Tax Credit, followed by the Earned Income Tax Credit, and then
perhaps the credit awarded for horizontal drilling for oil and gas. All deal
with relatively small constituencies and empirically at best have dubious
return to taxpayers (the drilling credit); at worst, they clearly have a
negative impact.
Yes, these would have the impact of
a tax increase (in the case of the EITC, more accurately a loss of subsidy),
but only on relative small groups, unlike something on the order of the
exemption on sales tax for the sale of unprepared foods, drugs, and utilities.
And because of this aspect legislators normally averse to raising taxes, or at
least without some offset elsewhere, could argue that these items’ counterproductive
nature that only aid a few justifies their elimination.
And while Gov. Bobby
Jindal’s known antipathy towards tax increases in any form might appear
discouraging, the Legislature having to get these past his potential veto, the
fact is the same two-thirds vote to pass a tax increase is required to override
a veto. If that vote can be achieved initially to send the legislation to him,
there’s no reason the same coalition can’t reform to override a lame duck
governor’s veto on these.
However, assuming it’s just these
three measures that got axed, the reality is that only the impact of no EITC
would be felt significantly in FY 2016, about $50 million worth, with the
others’ impact coming only slowly over the years. Trying to take out others has
problems either of broader constituencies making them politically less possible,
or with fewer beneficiaries are small and incremental in nature.
It’s a problem, but with fiscal
difficulties looming so large, even in this election year part of the solution
may come by ditching finally the least useful of tax exceptions.
3 comments:
How about just cutting back on the state government...'re: building so-called affordable housing, the one in houma is costing 2x as much as if a private developer was doing it.....but it's government MONEY
As to our Louisiana institutions of higher education, you say: "...the system is overbuilt with too many institutions chasing too few students ..."
Really! And they are about to get hit again financially by this Administration.
Why, I ask, has your absolutely great Governor not done anything, I mean anything, about this in his seven years in office?
Instead, he has, and will continue, to cut the money they have.
Where is the solution? Or, the political will to implement a solution?
Instead of framing eliminating the "film tax credits" as a tax increase you should call it what it really would be---ending special interest welfare.
The film makers owe little tax and ending the subsidies would not put much tax burden on them. It would end the welfare they extort from the taxpayers.
Who wants an industry whose says if they do not get 30%+ of their expenses paid they will leave??
Jindal is a coward if he doesn't end those film and digital media giveaways and should put aside his presidential ambition. Anyone that will not stand up the film industry special interest has no business dealign in foreign policy with the powers of the world.
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