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Friday, February 23, 2018

Measuring Louisiana's 'fiscal cliff'

Posted By on Fri, Feb 23, 2018 at 3:29 PM


Exactly how high is Louisiana’s “fiscal cliff” anyway? It depends on whom you ask. Some say it’s nearly $1.3 billion, while others say it’s more like $994 million, and still others say it’s closer to $692 million — or less.

Interestingly, they’re all looking at the same cliff. It’s all a matter of perspective, but it’s important to start with some facts and figures on which everyone agrees.

When Gov. John Bel Edwards and the Legislature took office in January 2016, Louisiana faced a $1 billion mid-year budget deficit and a nearly $2 billion “structural” deficit (a term applied to Louisiana’s finances by Moody’s Investors Service) for the ensuing fiscal year — courtesy of former Gov. Bobby Jindal’s irresponsible fiscal policies.

In fairness, Jindal had help from the preceding Legislature, which included many current lawmakers. They bought into his fiscal fantasies knowing it was all bunk, so they don’t get a pass on the current mess.

At the urging of Edwards — who as a legislator voted for some of Jindal’s budgets — lawmakers in 2016 passed a set of “temporary” taxes, mostly sales taxes, that will expire on June 30.

Lawmakers promised to use the intervening two years to enact long-term fiscal reforms and end the cycle of structural deficits. To the surprise of no one, they not only failed to do that, they failed even to consider doing it.

So here we are, facing yet another cliff. Which brings us to measuring it.

The number most frequently mentioned these days is $994 million. That’s how much recurring revenue the state will lose if the temporary taxes that expire June 30 are not renewed — and so far, everyone at least agrees that that’s how much the temporary taxes produce.

Pessimistic observers use the $1.3 billion figure, however. It includes the expiring taxes plus the cost of inflation and other adjustments such as pay raises (which lawmakers have not granted to state employees in some time). This figure is sometimes used as leverage in tax and budget negotiations, but it is quickly dismissed by conservative anti-tax lawmakers.

Many conservatives, by the way, are already using the $692 million figure. That’s based on official estimates that Louisiana will collect $302 million more in state income taxes next fiscal year as a result of changes in the federal tax code — so they subtract that amount from the $994 figure and use that as the size of the cliff.

All the numbers have some validity. Given that Republicans have a majority in both the House and Senate, the $692 figure has gained currency. It’s a lot lower than $1.3 billion, but it’s still quite a climb for many GOP lawmakers, who are loath to vote for taxes — even if those taxes are being renewed at lower rates, as proposed recently.

If the wheels don’t come off the special session before this article appears in print (and that’s a distinct possibility), we’re going to hear a lot more about the size of Louisiana’s fiscal cliff — and what it will take to scale it.

What we won’t hear is any meaningful talk of long-term fiscal reform.

Plus ça change.

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