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Jeremy Alford on the future of Louisiana’s budget crisis, post-Bobby Jindal 

As the governor eyes the presidency, lawmakers must tackle a $1.6 billion budge hole largely on their own

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On the morning of Feb. 27, Gov. Bobby Jindal's administration presented to lawmakers and the public its proposal to balance a $24.6 billion budget for the next fiscal year. It was a packed room at the state Capitol, filled with tension and fear, with only wisps of hope.

  Lawmakers without a seat on one of the budget committees lined the walls of the House meeting room as lobbyists worked the hallways outside, where Democrats earlier had held a quiet but scornful news conference. A reporter from The New York Times was there too, a byproduct of Jindal's presidential ambitions — and a follow-up to the negative press the governor received recently because of his previous patchwork budgets, which Moody's termed "a structural deficit."

  Back in the room, Commissioner of Administration Kristy Nichols trudged through a PowerPoint presentation as lawmakers and reporters tried to keep pace. Few were surprised by what they saw and heard; the administration wisely had leaked key sections to the Associated Press the night before, sucking some of the air out of a touchy situation that had been building for months, some say years.

  Lawmakers knew even before the meeting (which was rescheduled to follow Fat Tuesday by three days) that the $1.6 billion shortfall — 20 percent of the state general fund — was deadly serious. Many had stayed quiet in the preceding weeks, opting instead to wait for the executive budget proposal. Many refused to reveal their own thoughts until then, hoping the administration would offer an out.

  Such hopes were quickly dashed. The executive document — a mix of tax credit changes, higher university fees, a bonding scheme and a few contingencies — is now widely considered "Plan A." Luckily there are 25 other letters in the alphabet.

  "I don't know many people who wanted to file any of his bills," state Sen. Robert Adley, R-Benton, said of Jindal's initial proposals. That's a far cry from the norm. The spending bills that lawmakers approve each spring traditionally hew closely to the governor's budget proposals.

  Things are different this year. Lawmakers appear left to plot their own course. That may prompt prognosticators and historians to temporarily redefine the notion of "legislative independence," which historically meant bucking the administration — or at least trying to do so. This year, it's more about lawmakers setting their own policy agenda while trying to stay within the governor's evolving framework of what is allowable in terms of increasing revenue. Call it a poor man's version of independence.

  This much has not changed: Jindal will veto any attempt at a net tax increase. He is willing, however, to support a tax increase if it is offset either by a tax cut, credit or rebate elsewhere in the budget. The concept is supposed to reflect "revenue neutrality," a term that may as well be a four-letter word around the Capitol. That Jindal has conferred on this stance with Americans for Tax Reform, led by D.C.-based tax foe Grover Norquist, has only furthered the widespread perception that the governor doesn't own his final session.

  "It's unconscionable to think our governor is deferring to a man who can't even vote in Louisiana," state Sen. Rick Gallot, D-Ruston, said. "I think people would be shocked to know that."

  Jindal's travel schedule and his apparent focus on early GOP caucus states means there's no figurehead on the fourth floor to negotiate with legislative leaders and the big lobbies. Consequently, an uncharacteristic sense of uncertainty presaged the opening of the annual session this week.

  Even Senate President John Alario, R-Westwego, with 43 years at the Capitol and enough chips to make most calls on his own, had no idea what to expect.

  "I think it is going to be the toughest session I've personally seen," Alario said. "We have various senators working on various solutions and the same is happening in the House."

  Jindal will be counting on Alario and House Speaker Chuck Kleckley, R-Lake Charles, to make sure lawmakers adhere to his revenue neutrality rule. Independence by any definition can only go so far. Should Jindal lose on that front, it will mar his presidential campaign kickoff. Don't bet on that happening; Louisiana governors always find a way to win.

"I think it is going to be the toughest session I've personally seen," says State Sen. President John Alario, a veteran of the legislature's budget wars.

  The governor's cornerstone proposal this session involves making 12 refundable tax credits nonrefundable, which would save the state $536 million in expenditures. Most of that sum — about $377 million — would come from scaling back the inventory tax credit. The business community is up in arms about that idea, and lawmakers have dutifully soured on it — a reflection of both the autumn election cycle and Jindal's waning influence. Instead, many lawmakers want to kill the inventory tax altogether, much to the delight of business and industry, which alone pays the levy.

  Even if lawmakers go along with Jindal's tax credit plan, which would direct part of the resulting savings to higher education, Louisiana's colleges and universities would still face $211 million in cuts next fiscal year. Most legislators agree a cut that big is unacceptable, but there's no agreement as to where to find more money. (For more on higher ed's budget dilemma, see Clancy DuBos' story on p. 15.)

  In yet another example of the many moving pieces of the budget picture, repealing the inventory tax would stun local governments that rely heavily on it as a source of revenue. Thus, local governments could find themselves fighting public colleges and universities for funding if the inventory tax is eliminated.

  "If the state takes away the inventory tax, local government and the local taxpayer will suffer tremendously," said Louisiana Municipal Association Executive Director Ronnie Harris, adding that local governments may have to increase property taxes across  the board to make up the loss.

  Then there's health care, which along with higher ed is the only other budget area where lawmakers can make large cuts, due to constitutional and statutory dedications. The cuts there run into the hundreds of millions of dollars in Jindal's proposed spending plan, leaving lawmakers to fill budget holes within budget holes.

So what are lawmakers to do? Ideas abound.

  For starters, there are veto-proof revenue-raising resolutions that lawmakers could use to circumvent Jindal (with a two-thirds vote). That's risky, however, since Jindal has line-item veto authority over the budget bill. Several lawmakers have filed resolutions to temporarily suspend all statewide sales tax exclusions and exemptions over the next fiscal year. Such a resolution could generate as much as $2.9 billion. Other veto-proof resolutions would temporarily suspend a bevy of other exclusions, exemptions and credits.

  Lawmakers also may increase the cigarette tax, which looks more like a sure thing with each passing day, and pursue a plan to collect sales taxes on Internet purchases, which is a tax already on the books but one which has largely gone uncollected. Creating an oil and gas processing tax is probably a nonstarter, but it's on the agenda.

  Other proposals include eliminating or reducing the film tax credit and the Enterprise Zone program, which are popular but have been rocked by cases of abuse in recent years.

  There are also taxes in disguise, as state Rep. Jay Morris, R-Monroe, puts it. "If there are taxes, they will be renamed, papered over, lawyered over and dressed up to look like something else," he said. For example, at least eight executive departments and agencies have proposed $74 million in new fees and fee hikes (not "taxes" per se, but close enough).

  So far there's no rallying cry behind any single idea, which is understandable. While Louisiana has dealt with large budget shortfalls in the past (especially during the 1980s oil bust), the proposed solutions never have been spread out across so many bills. There's usually a lead budget bill and a handful of supplemental bills, but this year hundreds of other bills are vying for passage to help the main budget bill stay in balance.

  In a session that will last just two months, lawmakers face a mighty task. They will either have to plot their own course — independent of the governor — or pass tax increases and somehow find offsets to comply with Jindal's revenue neutrality rule. "It'll probably be a mixture of both," said state Rep. Lance Harris of Alexandria, chairman of the House Republican Caucus.

  The daunting task ahead has prompted some legislators to hunt for $800 million in new revenue to mash up with a few accounting tricks, rather than cover the full $1.6 billion shortfall. That strategy suggests a six-month budget taking effect July 1 — giving Jindal just enough time to get out of office before the well runs dry — and putting the entire mess squarely in the lap of the next governor.

  Louisiana ended up in this situation by spending a $1.1 billion surplus left by former Gov. Kathleen Blanco in 2008 and then passing generous tax breaks and using one-time money to cover the lost revenue for the next six years. Team Jindal has been quick to blame the drop in oil prices, which tumbled last October, but if oil prices shot back up today it would make little difference. The administration and Legislature put a record $1 billion in one-time money in the budget last year, creating an instant shortfall that will only grow in future budgets. And all known fund reserves have been tapped out.

  To hear Alario describe the many possible scenarios, finding a solution will be akin to throwing spaghetti against the wall and hoping some of it sticks. "It's going to take a little piece of all those things to make it work," Alario said. "But at some point we'll have to pull it all together and see what works best."


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