Two weeks into the legislative session, the governor’s chief budget official suggested today there is a distinct possibility the Legislature will “punt” on fixing the state’s looming budget problems.
“They don’t sense the urgency of the (fiscal) cliff—it’s still a year away,” Commissioner of Administration Jay Dardenne said during a fiscal reform panel discussion at the Public Affairs Research Council of Louisiana’s annual conference. “I can assure you they will be back in one or more special sessions if the cliff is not addressed.”
The “fiscal cliff” is a phrase widely used at the Capitol to describe the state’s looming budget crisis next year, when roughly $1.3 billion in temporary tax hikes fall off the books.
Dardenne’s remarks today preempt next week’s hearing on Gov. John Bel Edwards’ key piece of tax legislation, a commercial activity tax or a tax on gross receipts. The prevailing sentiment among lawmakers is that the proposal is likely to die in the conservative House tax-writing committee. Dardenne also noted today the tax is not picking up steam in the Legislature.
“It’s still early,” Edwards said at the PAR luncheon after the panel. “We’re only in the second week, so maybe we’ll get there.”
Two other lawmakers on the morning panel, Sen. Sharon Hewitt, R-Slidell, and Rep. Chris Broadwater, R-Hammond, laid out the challenges they face in trying to solve the fiscal cliff as well as rewrite the state’s tax code to be simpler and fairer.
For one, many of the reform ideas, which come from a blue-ribbon task force created by the Legislature, must gain two-thirds support from both chambers. They also must get a vote from the public, which lawmakers found last year to be difficult.
Aside from that, there are divisions not only between the Democratic governor’s administration and the Legislature, but also within each party, Broadwater said.
“It makes the negotiating process much tougher,” he added.
Republicans lawmakers say they will advocate for a “standstill budget” for the upcoming fiscal year, which would mostly stave off the immediate $440 million budget shortfall they face. But some costs are mandated to increase by the federal government, and even with a standstill budget, a fiscal hole for next year will still exist.
“There are going to be cuts,” Hewitt said after the event, chafing at Dardenne’s suggestion that lawmakers have skirted the issue of which state services they want to cut. “We pass a budget every year.”
The panel largely agreed that to make Louisiana more competitive for economic development, lawmakers must stabilize the tax code and stop making changes each year.
Jason Decuir, principal at the tax firm Ryan LLC, said he has trouble advising his clients on what their 10-year tax exposure will be in Louisiana because it changes so frequently.
“All the constant changes that have happened since 2015, it’s stifling investment,” Decuir said. “(Businesses) are not sure whether to invest in the state anymore.”