The third special session of the year is over, a deal was finally struck, and theoretically Louisiana’s ongoing budget uncertainty has been settled for at least the next seven years. Given the drama of the last several months, that’s good news, but what are the takeaways from the long, drawn out process Louisiana has been through?
There are several worth noting. The first is that there was widespread agreement among lawmakers that that the state needed to renew at least some of the expiring sales taxes. The question was how much. At the end of the day, there actually wasn’t much difference of opinion on that. The Republican starting point for this session was to renew .4-percent of the expiring penny of state sales tax. The governor and the Democrats pushed for retaining .5-percent.
The compromise was .45-percent of a penny – a difference of five-hundredths of a cent between the two proposals. That’s a pretty small amount, and though it does equate to real money in the big picture, for the average taxpayer the final debate was over something akin to a rounding difference.
A second takeaway is that both people and the Legislature value higher education and TOPS. In the various sales tax scenarios over the last several months, lawmakers struggled to reduce the sales tax without cutting either one or both. In the end, they decided to shield both higher education and TOPS from cuts.
Finally, while some lawmakers pushed hard to make significantly deeper cuts in state spending, they couldn’t find a way to do it. While the compromise agreement that was reached does cut another $40 million, that’s a far cry from the $140 million or so that many advocated in the previous special session. Besides higher education and TOPS, the gaps in funding for housing state prisoners, the food stamp program, juvenile justice initiatives and others proved to be a bridge too far.
So what is the outlook going forward? Clearly, many in the Legislature still express the need to shrink the size of state government, but as all these special sessions have shown, after a decade of budget woes it’s hard to get a majority of the Legislature to go along.
Another thing that is apparent is that with this new round of temporary taxes in place until 2025, there is ample time to begin to explore long-term budget and tax reform options. It’s not mentioned often enough, but a significant percentage of the appropriations to all state agencies doesn’t go to general operations or providing services, it goes to retiring liabilities in the state retirement systems. That’s a difficult nut to crack, but there are things we could do now which could have a positive impact on future retirement debt.
There’s also value in looking at ways to reduce the dependence of local government on state government and provide more flexibility and autonomy to local officials. Those are just two areas where major structural changes could be made.
It’s encouraging that even though it took three special sessions, the last one ended in compromise. After all the tensions that dominated past meetings, the House actually broke into applause when the compromise tax measure passed on the floor. It was a rare show of camaraderie and unity that seemed long overdue. Hopefully, lawmakers will choose to build on that goodwill going forward and remember that as they continue to address difficult issues, compromise can actually lead to productive outcomes.