Legislature must trump Edwards on deficit agenda
Even if Democrat Gov. John Bel Edwards uses his authority to force the Louisiana Legislature into special session, Republican legislative leaders still can force him to dance to their tune that emphasizes efficient government of appropriate size.
Next week the Revenue Estimating Conference will meet, potentially to change its forecast of fiscal year 2017 revenues. When it met late last year, mainly at the behest of House Speaker Taylor Barras, it did not alter the current forecast that already has come in around $300 million fewer than budgeted.
However, trends may not have reversed sufficiently so as not only to create a deficit on top of the one previously declared, but also a significant one. So large, in fact, that Edwards alleges nothing less than a special session can do to fix it, meaning broad tax and/or fee increases on the table. And while Edwards complained about the REC not declaring deficit conditions in December, which would have required a special session after 30 days if administrative actions still left a deficit, he did not issue a warning for executive branch agencies to clamp down on spending like he did earlier last year.
But Barras begs to differ, saying something in the guessed-at $300 million range the governor and Legislature can fix by cuts alone using their constitutional powers. Curiously, Edwards claims that impossible, even though a review of the budget numbers and constitutional rules involved regarding deficit reduction supports Barras’ views that cuts alone across a wide spectrum of agencies would not work only in the unlikely event that the gap gets to around $450 million.
Assuming the $300 million figure, allowable use of a third of the Budget Stabilization Fund would drop that shortfall to just $181 million. And given only by the beginning of February at the earliest could action commence, any changes would have just a five-twelfths effect on the remaining budget, meaning that amount pro-rated grows 140 percent to $434 million in annualized budgeted authority.
Yet several effective solutions present themselves. First, the state could repeal its requirement that any of its charity hospitals accept patients in the 139-200 percent federal poverty limit category without requiring compensation from them, which would remove $56 million from this total. No other state extends free care to such a high-earning range of individuals and as supposedly the Patient Protection and Affordable Care Act applies to them and subsidizes them, they can get insurance for next to nothing.
Also, the state could ratchet down the $180 million wastefully reserved to pay off those who shoot movies in the state. While three southern states have no caps on rebates, they have restrictive criteria that limits the amounts of money that qualify. Several others have caps ranging from $5-32 million annually. Louisiana could generously go down to $30 million, saving $150 million.
In addition, policy-makers could change the case mix reimbursement formula for nursing homes that pays these facilities for empty beds. This sweetheart deal subsidizes operators for poor financial decisions made on their part as they overbuilt, transferring this risk to taxpayers. Adding that several million to proceeds from changing the definition of indigent for health care benefits and the level of cash gifts to moviemakers, that’s already half the pro-rated deficit. Surely Edwards can cull the remainder, representing eight-tenths of a percentage point pro-rata, from a budget for executive branch operational spending of $27 billion.
But Edwards not only can call a special session for any reason, regardless of the feelings of the Legislature, but he also define its contents. He sounds eager to do so with that agenda involving some combination of income tax hikes and/or slicing of tax credits in order to support outsized government.
Legislative leaders must not yield. If a special session gets called and it includes any or all items about redefining indigence, curtailing the Motion Picture Investors Tax Credit, and changing the case mix methodology, then leaders should act on those and help Edwards cut spending elsewhere. However, if he fails to include these, leaders should urge adjournment after a day (it costs around $25,000 a day just for legislators to convene, and thousands of more for other staff to support them in a session) and leave to Edwards the task of cutting, results from which he would own completely in the eyes of the public.
Therefore, either Edwards cooperates in finding targeted revenue enhancements from excising bad policy rather than depending upon blanket tax hikes or scrapping tax breaks with more sufficient policy grounding, or he’s left holding the bag that garners approbation from voters. This presents the best chance to right-size a state government Edwards seems sacred and bound to grow, using whatever crisis he can to accomplish this.
Posted by Jeff Sadow at 12:00