A team appointed by the new governor released a list of possible options for fixing the state’s budget woes. Many of those options involved increasing taxes.
“If we don’t raise revenue, then there are going to have to be some severely painful cuts. The days when we say we’ll tighten our belt, we’ll streamline, we’ll consolidate things and things will keep going like they are today … those days are over,” said Jan Moller, the director of the Louisiana Budget Project. He was part of the Edwards-appointed Transition Committee on Fiscal Matters.
As it stands right now, the state faces a $750 million budget shortfall for the current fiscal year, which ends in a matter of months. Meanwhile, the deficit for fiscal year 2017 is already slated at $1.9 billion.
“If we shut down every single college, community college, technical college in Louisiana today, we still wouldn’t save enough money just to make it through the fiscal year – that’s how serious this problem is,” Moller said.
Moller said that with such a short timeline to fix this year’s budgetary problems, the number of options for the state to choose from is limited. For example, the state could increase the sales tax as well as the tax on alcohol and cigarettes.
“There are some short term fixes, all of them are fairly unpleasant … and none of them are things that anyone would want to do in a normal scenario, but we are not in normal times with regards to the state budget,” Moller said.
Edwards has publicly indicated an interest in cutting spending as well, but Moller said there are restrictions with that approach.
“When you’re talking about making cuts, the cuts you really can make are healthcare and education … And those are the services people value the most,” he said.
Once the state has cleared this year’s fiscal problems, Louisiana has by no means entered smoother waters. The shortfall for the next fiscal year is already forecasted at $1.9 billion.
To fix that, the committee provided several longer-term options. For example, the state could end certain tax cuts, including the rule that allows individuals to deduct their federal income tax from their state return. Louisiana is currently one of three states that has such a policy.
“That deduction alone is worth more than $900 million dollars a year,” Moller said.
Another option is introducing taxes to services like cable television, lawn maintenance, and haircuts. Other states already have adopted such a measure.
Any change to the state’s tax code requires a two-thirds vote in the state’s legislature. They are scheduled to have a special session to address the budget in February.
The current budgetary shortfall is the result of multiple factors, including dropping oil prices and increased Medicaid costs that were not addressed in the last budget.
Gov. Edwards is expected to release his own proposal to fix the budget in coming days. Earlier this week, Gov. Edwards seemed prepared for the menu of options that he now has to pick from.
“All of the options are not going to come from the desert end of the buffet line, some of its going to be spinach, Brussels sprouts, and broccoli, so we just have to get used to that,” he said.
The committee’s full report can be found HERE.