Gov. Bobby Jindal tried to strike a balance between holding the line on taxes and protecting Louisiana’s higher education and health care services in the budget proposal he released Friday (Feb. 27).
The Louisiana Legislature will work from Jindal’s financial plan during its spring lawmaking session to come up with the final budget for the state’s fiscal year that begins July 1. It’s likely the budget will be finalized some time in June, after the governor has reviewed the lawmakers’ adjustments.
Jindal is considering a run for president in 2016, so it’s important that he not be labeled a tax hiker, but Louisiana is facing a staggering $1.6 billion shortfall next fiscal cycle. Higher education leaders and health care advocates have warned that the states financial woes would be devastating for services, leading clinics closures and academic programs shuttering.
To stave off the crushing cuts, Jindal has suggested rolling back 12 refundable tax credits totaling $526 million, a move which has upset the business community. The tax credits largely benefit business interests, and they said his proposed changes will stifle economic growth in the state.
“That would result in a pretty substantial tax increase on Louisiana employers and make us pretty uncompetitive,”said Stephen Waguespack, head of the Louisiana Association of Business and Industry.
The Jindal administration is also suggesting the Legislature raise the cost of providing various services like business permitting, ferries and water well inspections. The governor can raise user fees without drawing the ire of national anti-tax groups.
Yet even with the tax program adjustments and fee increases, Louisiana’s higher education system would still facing a $211 million reduction in funding. The governor will be able keep one of his signature initiatives from this year in place — a higher education program called the WISE fund — only by funding it entirely with federal dollars tied to hurricane relief.
That remaining $211 million gap at colleges and universities has lead Jindal to suggest creative forms of financing for higher education. The governor has suggested legislators enact a new student “excellence” fee. Students and families paying the “excellence” fee would subsequently receive a tax credit to covers its costs.
The tax credit associated with the “excellence” fee would be paid for with a hike in the cigarette tax. The Jindal administration estimates it could bring in an additional $100 million through raising the cigarette tax to the Southern regional average.
Some legislators have asked why the state has to go through the trouble of raising students fees and offering a tax credit, when simply raising the cigarette tax and directing the new revenue to higher education would achieve the same funding goal. But raising a tax outright would draw negative attention from the national anti-tax groups, which Jindal wants to avoid.
Innovative solutions with tax credits also can’t solve all of Louisiana’s budget problems. Spending on health care services will still drop $235 million next year, in part because Louisiana will no longer be able to put up the money required to get matching federal funding for certain programs.
State funding for a network of New Orleans area health clinics that serve 57,000 people has been taken out Louisiana’s budget for the next fiscal year. Without the money, at least some of the clinics would have to close.
“You’re going to see a drastic reduction in mental health services and primary care services available to the community,” said Susan Todd, executive director of 504HealthNet, a coalition of organizations concerned with providing health care to uninsured in the Greater New Orleans area.
The Interim LSU hospital in New Orleans — which handles patients who would have typically gone to the shuttered Charity Hospital — has also not received $87 million in additional funding from the state that it requested. The hospital is about to move into a brand new facility, where additional funding will be required to serve a larger number of patients, according to New Orleans area lawmakers.
Some legislators, still displeased with the cuts proposed, have said they want to look at more tax credits to eliminate or reduce. The governor has a relatively narrow field of credits he is willing to rein in, because changing these types of business exemptions can be considered a tax hike by some national groups.
The lawmakers, including many conservative Republicans, have a much more flexible approach to credits and exemptions however. Many don’t consider eliminating a tax credit to be a tax hike. They expressed interest in altering the motion picture tax credit program — which cost the state around $250 million last year — in particular.
“I want to get a good definition today for what your administration says a tax is,” state Rep. Lance Harris, head of the Republican caucus, told the Jindal administration.
Reporters Emily Lane and Rebecca Catalanello contributed to this report.
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Julia O’Donoghue is a state politics reporter based in Baton Rouge. She can be reached at [email protected] or on Twitter at @jsodonoghue. Please consider following us on Facebook at NOLA.com and NOLA.com-Baton Rouge.