Fiscal Gimmickry Gives Louisiana Budget Headache

Unlike their cohorts in 43 other states, Louisiana’s legislators came into session this year with a budget that could be balanced simply by staying with the status quo. But a battle that’s expected to rage until the Legislature’s June 12 adjournment threatens to make Louisiana budget trouble state No. 44.

It all started April 29 when Gov. Mike Foster said in his session-opening address that the state was in great shape and no new taxes would be needed “because Louisiana is one of only seven states without a budget crisis.”  

When the Democratically-controlled state House of Representatives passed some and killed other revenue renewals that left a $320 million hole in the state’s $16 billion budget of self-generated and federal revenues, the governor lamented: “We managed our way through a recession and terrorist attack, but are now risking creating our own budget crisis.”

Foster, a Republican, later acknowledged that Louisiana has a budget crisis every two years because, unlike any other state in the nation, it has a revenue stream that’s heavily reliant on “temporary” taxes that expire June 30 of even-numbered years.

In those years, the Legislature has fiscal sessions dedicated to revenue and expenditure matters; general sessions are in odd-numbered years. Lawmakers sometimes refer to the taxes as “temporary” laughingly because they’ve been imposing them on food, utilities, cigarettes, car rentals and a few other things since 1986.

State tax law actually exempts some of the items from taxation, but the Legislature hasn’t voted to make the taxes permanent, supposedly with the intention of some day restoring those exemptions. Louisiana pays a penalty for being the only state with temporary taxes — bond firms rank it near the bottom of the states because of it.  

Renewing taxes is a costly process. House Appropriations Committee Chairman Jerry LeBlanc, D-Lafayette, calls it “buying and selling the state every two years.” The chairman of the Finance Committee, Sen. Jay Dardenne, R-Baton Rouge, said “I don’t think there’s ever been a legislative session when deals weren’t made” to get taxes passed.

Foster calls fiscal sessions “extortion sessions” because of the number of deals that have to be cut to get taxes passed.

A different wrinkle came into play this year. It’s what the governor termed “class warfare.” A number of senators want to give the wealthiest 21 percent of taxpayers an income tax break and renew all four cents of the sales tax. Most House members are against that because 79 percent of Louisiana taxpayers wouldn’t qualify for the income tax break and the sales tax proportionately hits them harder than high-income folks.

The House wants to forgo the the income tax break and reduce the sales tax by one penny on the dollar, or 25 percent. It’s a big-ticket difference of opinion between the two chambers that must be ironed out before the Legislature adjourns.

Foster, a multi-millionaire Republican with a populist slant, sides with the House on abandoning the idea of the income tax break. He’s rallying higher education officials whose institutions stand to be hardest hit by cuts that will flow from a budget gap. Higher education is especially exposed because over the years, protection for almost everything but it and health care has been written into Louisiana’s constitution.

Mike Hasten covers Louisiana politics for Gannett Newspapers