So Democrat state Rep. John Bel Edwards,
when he assumes Louisiana’s governorship in about a month, wants
to have the Legislature repeal the Student Assessment for a Valuable Education
tax credit later next year. This should make Louisiana’s higher education
interests nervous.
The Gov. Bobby
Jindal Administration formulated the SAVE credit as a method
to hide large-scale tax increases in the main approved by Edwards and
majorities in the legislature last year, making these dollars appear offset by
the credit one gets by instituting a new fee for college that students must pay
but then allowing its write-off in entirety, conveniently without the enrollee having
to do any paperwork.
However, to make it work in that
fashion, this produced a practical effect of dedicating $350 million to higher
education, or roughly a quarter of all
state money budgeted for higher education in fiscal year 2016. Doing this
fulfilled the desires expressed by a number of higher education officials, who
for years, even decades, found their funding buffeted by the vagaries of a
budget that dedicated a large portion of revenues to specific purposes – but except
for the Taylor Opportunity Programs for Scholars awards and some grant monies,
none dedicated to higher education. This meant that in times of shortfall this
area disproportionately took reductions, so dependent upon the general fund and
funds sweeps it has become.
Unfortunately, this has exacerbated
the dedications problem, where now the budget dedicates some six-sevenths of
revenues. This lack of flexibility generated considerable discussion during the
recent gubernatorial campaign, leading to all major candidates pledging some
kind of action to loosen these locked-in revenues.
While the SAVE credit appears first
in line to undo, promises to go further warrant skepticism. The Legislature
could have taken this approach last year with a huge shortfall staring it in
the face and with funds sweeps not robust enough to cover the difference.
Instead, it indiscriminately
and thoughtlessly whacked away at certain tax credits on the basis of
political convenience rather than rationality (and apparently
unconstitutionally), triggering the huge tax increase. Most tellingly, on
the most obvious and easiest target of all, the incredibly wasteful Motion Picture
Investors Tax Credit, it effectively barely
reduced that at all, temporarily.
Thus, don’t expect much more in the
way of fortitude from legislators next year in any sensible delinking of
revenues to expenditures. They seem more likely to wilt under the pressure of
special interests largely to keep dedications unmolested, chickening out to
grow the budget with more taxes – especially with the tax-friendly Edwards to
assume the helm of the executive branch – instead of making sensible
rearrangements of existing funding flows from low-priority, even unnecessary,
purposes and excising unproductive credits such as the film credit and Earned Income
Tax Credit.
If that comes true, then higher
education will find itself again mostly unmoored from a guaranteed stream of
revenue and fighting for scraps as budgetary problems will continue, precisely because
the tax increases will depress economic activity and discourage new investment
that will cause tax revenues to slide in the years to come. Getting rid of as
many dedications as possible, the right thing to do but which legislators will
embrace tepidly because it demands more political courage out of them in
annually making budgetary choices that they now may disclaim, ultimately
recognizes the fact that the state has plenty of funding available but suffers from
misallocation, yet if undertaken incompletely gores the oxen of just a few like
higher education.
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