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A Plan May Finally be Coming Together…

August 4, 2017

By: Stephen Waguespack

Believe it or not, there is finally some good news to report on the state budget front: Governor Edwards is signaling that he plans to propose a detailed, specific plan to address the upcoming fiscal cliff. This change in approach from our elected leader is welcomed, timely and much needed.

Up until now, the people of Louisiana were receiving very different signals.

Last session, the Governor deviated from the fiscal recommendations made by the HCR11 Task Force (a group driven by members of his own team) and instead drafted and proposed a commercial activity tax (CAT) that was riddled with unintended consequences. The proposal met defeat by a wave of bipartisan opposition and the Governor spent most of the remaining days of session asking the legislature to take the lead. The House, in turn, requested spending cuts instead of new taxes, a suggestion which was not well received on the 4th floor.  Session eventually ended with a balanced budget, but not much else in terms of budget or tax reform to prepare for the upcoming fiscal cliff. A special session to be called this fall or early next year, to decide what to do with the Governor’s temporary taxes, seemed all but inevitable.

However, only a few short weeks ago the Governor sent a letter to the Speaker of the House saying he may not call that special session after all, unless House leaders come forward with their own plan centrally focused on new revenue. Many were left scratching their heads on that one, considering that not calling a special session would require the Governor to submit a budget later this year filled with cuts much deeper than the ones he refused to accept just last month. It was unorthodox to see an elected official, in essence, threaten himself. Knowing how unappealing that option must have looked in hindsight to the Administration, many folks in the legislature simply saw that letter as just an attempt to influence press coverage rather than begin the collaborative effort required to develop a comprehensive plan.

Thankfully, things have now changed. Concerns that the Governor was not willing to offer his own comprehensive plan to solve the fiscal cliff appear to have been misguided. That plan by the Governor now seems to clearly be on the way.

Will his plan extend the current 3-year sales tax increase by 2 more years to mirror his original 5-year proposal?  Will it instead propose new personal income taxes to replace the sales tax increase? Will it be new business taxes? If so, will it target specific industries like movies, agriculture, manufacturing, oil & gas or telecommunications?

Instead of new revenue, will it propose spending cuts, budget restructuring, entitlement reforms or the unlocking of statutory dedications to finally get more flexibility to use existing dollars more efficiently? Will the tremendous number of local subsidies used each year to supplement local government be replaced with more autonomy and authority for local officials, driving those decisions away from the special interests that dominate the Capitol and closer to the taxpayers back home who foot the bill? Will reforms to Medicaid or our legacy pension systems be included? Will budget transparency to show the public exactly how their tax dollars are spent finally be implemented to rebuild some of the trust lost by taxpayers over the years, which has led to growing opposition from them to invest in obvious needs like infrastructure and education? Will it contain new ideas, old ideas or a mixture of both?

There are so many ways he can go with his plan and it will be interesting to see where his proposal ends up. Regardless, it is a positive that it is now clear he intends on offering his own plan. This will help shape the substantive and controversial debate on taxation and budgeting this state has largely avoided for decades.

This new commitment by the Governor to develop a specific plan apparently begins with his reaching out directly to the business community for input, a move that was a long time coming and warmly welcomed. In contrast, it is no secret that the first few years of this administration have been dominated by state-sanctioned lawsuits against the energy industry, aggressive efforts to unwind hard-fought education reforms that seek to help improve our workforce, and increasingly inaccurate and hostile rhetoric against employers regarding their contribution to the state and local government’s revenue pictures. Hopefully, these meetings will be where some of that harmful rhetoric is taken back and the collaborative trends begin to move our state in a different direction.

The Governor has specifically asked over twenty different CEOs and business leaders to come to his office to “discuss tax reform and solicit recommendations from the business community about the best approach to stabilize Louisiana’s budget.” The written invitation from his office added that, “The meeting will be closed to the press and not recorded, however, Gov. Edwards will put out a statement to the media immediately following the meeting to thank the business leaders for attending and offering constructive input. A list of attendees will also be released.”

Press reports in recent days state the Governor has promised this is just the beginning of many meetings with many different folks to gain input on how to address the cliff. This appears to be just the first step in an entirely new approach…an approach that apparently will lead to a specific plan by the Governor to address the fiscal cliff in a responsible way.

The days of laying back, blaming others, relying on accusatory rhetoric and using the media to pressure others to bring him a plan appear to be over. The Governor appears to now embrace the responsibility to develop his own comprehensive plan to solve the fiscal cliff, explain it to the people of this state and use his political capital to sell it to the best of his ability. That would be a welcome change of pace. That would be leadership…and leadership is exactly what this state desperately needs.