BATON ROUGE–After several contentious days in a special legislative session, the state House of Representatives approved legislation on Monday to partially resolve an estimated revenue shortfall in the state's budget.
The House bill advanced to the state Senate on a 76-28 vote.
The projected revenue shortfall is expected in light of temporary revenue measures that expire this summer, after the 2018-2019 fiscal year has begun.
The bill broke a logjam in the House, which could not agree on any revenue measures in March, and marked a significant step toward solving some of the state’s budget problems.
The Senate could adjust the bill to raise more revenue to ease possible cuts in health care and higher education.
The House bill, authored by Rep. Lance Harris, R-Alexandria, who is the leader of the Legislature’s Republican delegation, would temporarily extend one-third of a penny of state sales tax. That would raise $369 million in revenue next year, and the third of a penny, which would make the state sales tax. 4.33 percent, would remain in effect through 2023.
On a 69-31 vote, the House also approved a bill by Rep. Katrina Jackson, D-Monroe, that would retain the reduction in the amount of the individual income tax credit for net taxes paid to other states until 2023.
The bill would bring $34 million in revenue beyond what is in Harris’ measure. That brought the total revenue that the House has passed so far to $403 million, still $245 million short of what Edwards says is needed to avoid budget cuts.
The Public Affairs Research Council, or PAR, issued a statement Sunday stating the “best bills are those that leave everyone somwhat unhappy.”
“House Bill 27 is less than what the governor wants, is disliked by some Democrats who see it as a regressive tax, is opposed by businesses against its utility tax, is less than ideal for credit rating agencies who prefer permanent taxes, and generally comes up short in raising enough revenue to fill even the more narrow measure of the budget gap,” stated PAR. “From PAR's perspective, the state will still lack a long-term, comprehensive structural fiscal reform even if this bill passes. And yet House Bill 27 is the most viable and reasonable instrument at this stage of the process to propel this special session toward a sensible outcome.”
Democrats in the Senate are expected to push for raising the sales tax from one-third of a penny to half a penny, which Harris opposed in the House. If the Senate adds half a penny, a House-Senate conference committee would have to work out the differences in the two bills.
The Legislature is in the middle of a second special session this year to try to solve the problems. A first special session collapsed in March. This session must end by June 4.
The bill needed 70 votes to pass. Out of the 76 votes it received, 40 Republicans, 33 Democrats and three Independents voted for it while 21 Republicans and seven Democrats voted against it.
More than 20 Republicans traditionally oppose any type of tax increases even if such measures are proposed by their own party. On the other side, while the Black Legislative Caucus typically opposes increases in sales taxes that predominantly affect the poor, some of its members voted for Harris’ bill as part of a bipartisan compromise to get the bill over to the Senate.
After the vote, the House immediately began debating how it could pass a separate bill appropriating the money raised by Harris’ bill and whether it could do that before the session ends June 4.
During that discussion, the House rejected a motion by Rep. Cameron Henry, R-Metairie, the chairman of the House Appropriations Committee, to override Edwards’ veto of a bill that both the House and the Senate passed recently that would have sharply cut state programs.
If the chambers cannot pass a new appropriations bill by June 4, the Legislature probably would have to return for a third special session, at a cost of more than $50,000 a day, later in June.
Harris maintains that the budget gap is $495 million instead of the $648 million that the Edwards administration has projected. The disparity stems from using different budget numbers as the benchmarks.
Harris’ bill also would remove certain sales tax exemptions and decrease the tax on business utilities from 4 percent to 2 percent. Harris maintained that under his plan, state agencies would only suffer 1.3 percent cuts on average.
Raising to half a penny was proposed in a governor-backed bill by Rep. Terry Landry, D-New Iberia, that a House committee rejected Thursday. The bill would raise $547 million, $181 million more than the bill that House approved.
Gov. Edwards would like to make the sales tax and other revenue permanent, but Harris said he had set a five-year sunset term on his sales tax bill in an attempt to find a compromise that would pass the House.
Jackson intended to make permanent the reduction in the tax credit for taxes paid to other states. But her bill was amended in a House committee as part of a compromise between Democrats and Republicans.
Even though the Senate is expected to expand the revenue created by sales tax bill, the Senate Finance Committee voted on Monday to gut a bill that would have limited tax credits and other expenditures for 17 incentive programs for industries, including credits for research and development activities and making movies in Louisiana.
As originally written, the bill would have raised an additional $112 million.
But the bill’s author, Sen. Jack Donahue, R-Mandeville, made the motion to gut it. He said that after receiving a horde of phone calls over the weekend against the bill, he decided to amend it to instead mandate annual analyses on each program instead of capping any of them, resulting in no revenue raised.
Devon Sanders, Paul Braun and Kaylee Poche contributed to this report.