Call their bluff
The uncertainty over the state of the state’s finances pivoted this week when a key official in Gov. John Bel Edwards’ administration informed a Senate committee the projected deficit for the fiscal year that begins July 1 isn’t as large as Edwards and his underlings have led people to believe for weeks.
No longer does the Legislature need to find some $750 million to shore up the budget to avoid slashing appropriations for health care, higher education and the popular Taylor Opportunity Program for Students (TOPS). Instead, lawmakers only need to gin up $600 million in new revenues to make things right.
Commissioner of Administration Jay Dardenne credited the shrinking deficit to savings the Edwards administration believes will be realized from expanding the state Medicaid program. What Dardenne didn’t say is the Department of Health and Hospitals can afford to continue to trim a little overhead here and there thanks to the expected influx of money from the federal government because Louisiana, beginning July 1, will expand Medicaid.
Remember, Medicaid expansion was a key component of the Affordable Care Act, otherwise known as Obamacare. It promises billions of dollars for states that expand Medicaid to provide health insurance for the so-called working poor.
Before we delve any further into this latest budget-deficit “revelation,” let’s turn the clock back to early this year.
Shortly after taking office in January, Edwards said Louisiana faced budget deficits of well over $2 billion. Some $750 million of it was related to the current fiscal year while the deficit for the fiscal year beginning July 1 was pegged at $1.9 billion.
In a special legislative session in February, lawmakers raised some $1.2 billion in new taxes. Effective April 1, the new taxes included a one-cent hike in the state sales tax as well as the elimination of just about every exemption on the existing four cents in sales taxes. Some exemptions will come back into play next year and the year after while the new penny sales tax will be on the books through 2018.
The long and short of it is the Legislature turned to a short-term fix for a long-term problem that’s been years in the making.
Though the tax increases were levied effective April 1, the Legislature supposedly didn’t raise enough money (news taxes) to eliminate the entire deficit in the current fiscal year, or the fiscal year that ends on June 30. At least that’s what Edwards said in early March following the conclusion of the special session and just prior to the convening of the regular session.
Obviously the Legislature’s Grinch-like approach toward raising taxes wasn’t a problem. After all, the Edwards administration miraculously found some $160 million in savings in order to balance the current fiscal year budget to avoid levying any additional cuts to health care and higher ed.
Yet, that still left a deficit looming for the new fiscal year in the hundreds of millions of dollars. Some $750 million to be exact, or thereabout.
At least that’s what the deficit was at the beginning of the regular session. And that’s what it was when Edwards rolled out a doomsday scenario for health care, higher education and TOPS during his appearance before the House Appropriations Committee just a couple of weeks ago. The state needs more revenue or deep cuts are on the way was what Edwards said.
Now, according to Dardenne, the projected deficit heading into the new fiscal year is $600 million.
And since lawmakers are constitutionally prohibited from raising taxes during a regular session in an even-numbered year, the Legislature is expected to meet in a second special session of the year, or shortly after the conclusion of the regular session, to entertain another round of tax increases, including a spike in the state income tax. All to shore up a revenue shortfall that magically shrunk by $150 million in two-plus weeks.
Without a doubt, the Edwards administration is playing fast and loose with the state’s finances, and at some point, this Legislature needs to call their bluff.
Sam Hanna is a state