The unusual nature of the times may make a bill that should be unacceptable to the Louisiana Legislature in more ordinary days now agreeable.
Such is the case with SB 1 by Republicans state Sen. Barrow Peacock. The bill would divert, starting in fiscal year 2023 and for the following two, respectively four-ninths, seven-ninths, and all of the avails from the 2018 sales tax hike renewal of 0.45 percent to infrastructure spending, directly on projects equally among the state’s nine transportation districts.
We’ve seen this before. After the 2018 increase, in the 2019 and 2020 regular sessions Peacock made basically the same proposal, except portioned over five and four years, respectively. There’s a defensible logic to this: government should treat a temporary tax, no less one propping up government larger than necessary, as a windfall and spend it accordingly on nonrecurring items, with paring an extensive transportation backlog a great place to employ this strategy.
However, that can’t get around the fact that the tax should not exist in the first place. Trying to make it more palatable and putting its proceeds, in part and then finally in whole, to a wiser use doesn’t eliminate the tax’s basic offensiveness. Instead of deploying legislative resources towards alteration, they should go to excision.
Except now Louisiana, courtesy of Democrat Gov. John Bel Edwards, has intensified its campaign of wound self-infliction. Up to this time last year it merely came in the form of overspending and bad tax policy, but Edwards with his mostly pointless and counterproductive, if not on the whole costing more lives than saving them, economic restrictions said to combat the Wuhan coronavirus pandemic, set the state on the path to economic suicide with its corresponding negative budgetary impact.
Then, the federal government diversified and increased the risk to all federal taxpayers by a series of bailouts, with another in the works. Presumably, with another fiscal year covered negating the policy-caused revenue shortfall, policy-makers have far less incentive to wring out the baked-in inefficiencies and poor spending choices reflected historically in Louisiana’s budgets. No doubt the Edwards Administration, and spineless legislators, will proclaim all blue skies and sunshine by FY 2023 for the state’s economy as a result of another bailout and time.
Lost in all this wishful thinking is that Louisiana’s economy overdependent on resource extraction and low-value service provision was the most vulnerable to virus interruptions and will come back more slowly as a result. Thus, the traditionally undersubscribed notion in the state to start spending reductions sooner rather than later takes on even more importance than ever.
SB1 can act as a bridge to that. Using 2019 numbers (the most recent computed for the bill’s contents), FY 2023 would see $174 million diverted from recurring spending, FY 2024 would make for a $305 million hit, and FY 2025 would subtract the whole $392 million. The latest Revenue Estimating Conference forecast, obviously without this change, predicts for FY 2022 about $229 million fewer available than last forecast, and using that previous as a baseline shows recovery of FY 2023-25 of increases of $189 million, $402 million, and $493 million over that.
In other words, this diversion would eat up most of the presumed gain. Keep in mind, however, that given current overall spending trends, even accounting for a surplus so far this year, as spending would rocket up over $1 billion, there still remains a $669 million hole and would grow larger still if the trend continues through those next few years.
So, it’s time to nip this in the bud, using the cushion afforded by the upcoming raid on federal taxpayers and putting the nation’s currency printing presses into overdrive with massive debt issuance. And SB 1 can provide the incentive.
Put another way, for the shock therapy to rein in recurring spending by Louisiana government fomented from the wages of ongoing populist fiscal practices and supercharged by the pandemic response, neither cutting off the fix nor the dictates of SB 1 alone won’t provide the necessary splash of cold water to wake up sleepwalking Louisiana legislators. But double shock therapy, by having the two intersect in fewer than 18 months, might be enough to have policy-makers snap to it, and even force Gov. Nyet to behave responsibly.
Of course, that presupposes the same legislators impose this upon themselves by passing SB 1 and in a way that Edwards can’t or won’t veto it and make that stick. Nevertheless, for the above reason, this bill’s stipulations have graduated from nonstarter to policy worth considering.