BATON ROUGE, La. — Gov. John Bel Edwards set a Jan. 19 deadline on Wednesday to reach a tax deal with House Republican leaders for closing a $1 billion budget gap, or he won’t call a February special session aimed at balancing the budget without deep slashing.
That could leave lawmakers trying to craft a budget that strips the entire amount through cuts or letting the spending plan linger unfinished until a rushed, last-minute June special session, only weeks before the shortfall hits. Lawmakers also could call themselves into special session, though they’ve rarely done such a thing.
The governor said eliminating the gap through spending reductions would be “so nasty” and so damaging to education and health services that he doesn’t “believe there’s any way the Legislature would pass a budget that reflects a billion dollars in cuts.”
Edwards announced the deadline at an end-of-year news conference where he also touted what he considered bright spots for the state: Louisiana’s shrinking unemployment rate, increased enrollment in the Medicaid expansion program and avoidance of a midyear deficit for the first time in years.
But looming in the background is the “fiscal cliff,” when $1 billion in temporary sales taxes expire on July 1 as the new budget year begins.
Edwards wants to raise enough taxes to offset the expiring ones, to keep money flowing to government operations. House GOP lawmakers so far have blocked the tax ideas the Democratic governor proposed in previous legislative sessions. Edwards is trying again, with a package of sales and income tax changes proposed this week that would raise or maintain higher taxes for certain businesses and middle- and upper-income earners.
Tax bills can’t be considered in the three-month regular legislative session from March until early June, requiring a special session for Edwards to pass his tax plans.
The governor and Senate and House leaders are negotiating behind the scenes about the ideas, but Edwards said he needs “an agreement in principle” with House Republican leaders to call a special session because nearly all tax bills must start in the House.
The governor, as required by law, said he also will release his budget proposal for next year on Jan. 19, a spending plan that will have to reflect the $1 billion decline in general state tax revenue. Officials estimate that shortfall could balloon to as much as $4 billion in cuts to the $28 billion operating budget with the loss of federal matching dollars.
No one has offered a specific proposal for slashing that much spending.
Despite continuing concern over state finances, Edwards said he remains optimistic about Louisiana’s future and believes the state is “entering an era of prosperity.”
He said the state’s 4.8 percent unemployment rate is the lowest it’s been since May 2008, and he touted DXC Technology’s recent announcement it will establish a facility in New Orleans and hire 2,000 people.
“We have plenty of reasons to be optimistic that these job numbers are going to continue for some period of time, based on the number of projects that have been announced,” he said. But he added: “We certainly are not saying it’s mission accomplished.”
Asked about the federal tax bill that won final passage Wednesday from Congress, Edwards said it’s too soon to tell how the package of tax changes could impact Louisiana’s state tax collections. But he anticipated those collections likely would rise. Louisiana allows its businesses and residents to take a deduction on state tax forms for federal taxes paid, so if federal taxes drop, the deduction from state taxes will be smaller.
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