Local reaction to Edwards' 'doomsday' budget: 'Devastating'
Although a “doomsday” budget proposed by Gov. John Bel Edwards is grounded in reality, it isn’t realistically likely to be adopted, State Rep. Robert Johnson said.
“I can tell you that this budget will not pass,” Johnson said. “It is not a budget I would vote for. However, it is a budget that is based in reality.”
Johnson was on hand Jan. 22 to hear Edwards’ presentation of a “balanced budget,” as required by the state constitution.
Since the legislators have not approved any new revenue-producing measures, the budget is balanced by severe cuts to those programs funded by “discretionary” revenue to make up an almost $1 billion deficit.
“This budget is devastating,” Johnson said after listening to Edwards’ address on the budget. “The governor told us this is not the budget he wants to present and it is not the budget he hopes is adopted. However, state law says the governor must present a budget and that budget has to be balanced. This isn’t Washington, D.C.
"It’s tough to present a balanced budget when you have $1.3 billion in revenue falling off,” he added.
A “temporary” 1-cent sales tax expires this year, and with it goes about $1.3 billion in revenue.
EDWARDS DISAPPOINTED
Edwards said he is “disappointed” that legislators did not do more to adopt recommendations of a state task force presented in 2016. Since there are no proposals that would provide additional revenues, significant budget cuts are the only way to bridge the budget gap.
“The Legislature has yet to address the long-term structural tax reform that we need to implement,” Edwards said Jan. 22. “If we don't fix the cliff, no one is going to want to put their name on the cuts that are necessary.”
Johnson said the Legislature cannot adopt fiscal issues in this regular session, so any budget work will have to be done in a special session. Edwards is expected to call a special session in February prior to the regular session in March, Johnson said.
“The Legislature could also call itself into special session during the regular session,” he added. Legislators could also end the session without adopting a budget and then immediately go into special session, but that would run the risk of one budget year ending with no spending plan approved to take its place.
CUTS TO TOPS
Among the proposals in the “worst case scenario” budget is an 80 percent reduction in funding for the popular Taylor Opportunity Program Scholarships, called TOPS, in the 2018-19 school year.
“That would be absolutely devastating to these kids,” LaSAS guidance counselor Debbie Gaspard said. “They have been promised this since they were freshmen and to take it away now that they have done all the hard work would not be right.”
Gaspard said she is afraid such an act by the state government “might discourage some students from even going to college. Although there are other sources of financial aid to go to college, TOPS is the first in line for most of them.”
She said there could be room to revise the program, but any changes should not affect those currently working within the TOPS program requirements to qualify for the assistance.
“They should not make major changes now that would affect these students who have been working for this for four years.” she said.
When fully funded, TOPS would pay 100 percent of tuition to a state college for qualifying students. To qualify, a student must have at least a 2.5 grade point average and an ACT score of 20.
To qualify for a Performance Award, which includes a $400 a year stipend for expenses, a student must have 3.25 GPA. For an Honors Award, which includes an $800 annual stipend, a student must have a 3.5 GPA.
Edwards said the budget deficit has to be resolved in a special session in February to give students time to prepare for increased tuition and costs.
“The longer we wait, the more harm we cause,” Edwards said. “There is still time to come together and fix it.”
The TOPS program helps about 200 graduates per year in Avoyelles Parish public and non-public schools.
Marksville High had about 50 qualified for TOPS in 2017 and expects about 50 of the 2018 graduates to take advantage of the program. Avoyelles Public Charter had 48 students on TOPS last year and expects 47 this year. Avoyelles High had 39 students qualify for TOPS in 2017 and expects about 45 this year. LaSAS had 30 qualify for TOPS in 2017 and should have 39 this year. Bunkie High had 29 on TOPS in 2017 and will have 28 this year. St. Joseph High had six students on TOPS in 2017 and expects five this year. Nazarene Christian expects to have one graduate on TOPS this year.
Cuts to TOPS would affect incoming freshmen and students already enrolled in college who rely on TOPS for their tuition. Statewide, 48,800 students received TOPS scholarships in the 2017 fall semester, costing the state $292 million, the Louisiana Office of Student Financial Assistance reported.
The TOPS program has never been fully funded, meaning students have always had to pay a portion of their tuition even if they qualified for TOPS. Last year TOPS was funded at 70 percent. The reduction in state funding was applied on a pro-rata basis, meaning every student gets the same percentage of assistance. That change was enacted in 2016.
Prior to that year, TOPS recipients with higher ACT scores received full awards while students with lower ACT scores could have lost their aid completely.
In addition to TOPS, the no-new-taxes budget would cut $656.6 million from the Department of Health. Since those dollars match federal dollars, the state would also lose those. The total impact to the Health Department would be about $2.4 billion in order to save $656.6 million.
The proposal cuts $10 million to parish sheriffs in payments for parole holds, $34 million to sheriffs and other operators of transitional work programs and $25.8 million in state funds to district attorneys.
PARTISAN POLITICS
Just as partisan politics between Democrats and Republicans is blamed for the federal government’s brief shutdown, so too is the rivalry between the two parties a primary suspect in the state’s inability to resolve its financial troubles.
Edwards, a Democrat, said he doesn't want to cut TOPS at all. In what critics portray as an effort to put the black hat on the Republicans, Edwards said he would prefer to replace the $1 billion in lost sales tax revenue with other revenue, such as adopting new taxes and eliminating or reducing commercial tax credits.
Unfortunately, he noted, the GOP-controlled House opposes that course of action.
Johnson, also a Democrat, said the Legislature will have to restructure Louisiana’s tax system to provide more revenue to run the state.
If Republicans refuse to touch taxes and tax credits, a “cuts-only” budget would have to include cuts not only to TOPS but also to state highway projects, government-funded hospitals, higher education and programs for children and the disabled. While a “quick fix” would be to extend the “temporary” sales tax to cover this year’s crisis, Johnson said that is not as good an idea as it sounds.
“Extending the 1-cent sales tax would leave Louisiana with the highest average sales tax rates in the country,” he said.
When the temporary tax was imposed, critics predicted it would become a permanent part of the budget because it is easier to extend something that is already there than it is to adopt a new tax or cut services to replace that temporary tax revenue.
Edwards has also indicated he is opposed to renewing the temporary tax, saying legislators need to find another source of revenue to cover the deficit. He noted that sales taxes hurt the low-income residents more than the more affluent.
“In Louisiana, we have a low property tax burden but a high sales tax burden,” Johnson said. “Although the state has five cents of sales tax, we only get revenue from about 1 1/2 cents because of all the tax credits the state pays to businesses,” he added.
He said one plan is to eliminate exemptions that reduce the state’s sales tax collections.
“If we do that, we can actually collect more from four cents of sales tax than we are from five cents with those exemptions in place,” Johnson said.
One piece of “good news” is that Congress’ changes to the income tax system will give Louisiana about $200 million more in revenues because taxpayers will no longer be able to deduct 100 percent of their federal tax payments from their state income tax return.
While that is “good news” to the state budget makers, Louisiana taxpayers may disagree with how “good” the news is to them since it raises the amount of income tax they pay to the state.
“Right now we have 80 percent of corporations in Louisiana paying zero dollars in taxes,” Johnson said. “We actually had negative tax collections from businesses some years where the state owed them money due to the tax credits in place. That puts the burden of funding the state on the individuals. That is ridiculous.”
Johnson said there has been a lot of rhetoric from politicians “who want to be governor,” but no action to resolve the financial problem.
“They talk about cutting out the giveaway programs, which sounds good on TV,” Johnson said. However, he continued, eliminating funding for services to the elderly, the poor and children would not balance the budget. In addition, such drastic measures would have a severe impact on communities and the economy.
If legislators cannot agree on how to raise revenue and do not like the $900 million in cuts in the “doomsday” budget, “the governor has told them he is willing to look at the cuts they want to make. So far, they have not come up with a single cut.”