BATON ROUGE — Louisiana senators Sunday reworked the state sales tax increase that is the linchpin of rebalancing this year’s budget, deciding to keep the tax on the books for five years, rather than the 18 months sought by the House.
The Senate Revenue and Fiscal Affairs Committee quickly changed the sales tax expiration date before voting 10-1 to advance the proposal to the full Senate for consideration.
The state sales tax would grow from 4 cents on the dollar to 5 cents, starting April 1.
That would boost Louisiana’s average combined state and local sales tax rate, which currently sits at more than 9 percent, to the highest in the nation, according to the Tax Foundation.
It also would generate money quickly — and in large amounts — to help fill gaps in the state’s budget, which must be rebalanced by June 30. Estimates are that the sales tax would raise more than $210 million for this year’s budget and nearly $880 million for a full year.
House Republicans who are resistant to tax increases pushed for the 18-month expiration date on the sales tax. But Senate leaders said the money generated by the tax can’t be used in the state operating budget unless it’s available for three years or more.
“If it were to pass in its current posture, we cannot use it to balance the budget at all,” said Revenue and Fiscal Affairs Chairman J.P. Morrell, D-New Orleans.
With a narrow 6-5 vote, the panel also voted to send the full Senate a proposal that would change the payment schedule for businesses to turn over sales taxes they collect. The House-backed measure would raise $75 million in one-time cash for this year’s budget, but some businesses have argued it would be a more onerous tax collection method for them.
As the tax committee worked, the Senate Finance Committee reviewed budget reductions passed by the House, hearing grim scenarios of cuts that could hit services over the next four months.
Senate leaders say the House hasn’t done enough to raise money to help bail out the budget, and they’ll be looking to boost revenue-raising bills higher.
Senate President John Alario, R-Westwego, said the House’s package of tax hikes and cuts still leaves this year’s budget short anywhere from $150 million to $200 million. Senators say the cuts that would have to be made to fill the gap could damage services.
LSU’s medical school leaders — Larry Hollier from the New Orleans school and G.E. Ghali from the Shreveport school — say the campuses are threatened with slashing that would decimate graduate medical education.
Nearly $52 million in reductions proposed for the health department, if taxes aren’t raised beyond what the House has passed so far, would fall on the LSU hospital privatization deals.
But Hollier said those would be passed onto the medical schools, because the schools’ training programs and faculty are paid through contracts for services they provide at the hospitals. The reductions, he said, would have forced him to eliminate 120 resident positions in New Orleans for doctors-in-training.
“That’s not enough for us to maintain our health care workforce,” Hollier said.
Ghali described the possible cuts as “catastrophic,” saying he’d have to cut faculty by 53 percent and residents by 63 percent. He read a letter from a “highly-recruited individual” who decided to attend an out-of-state program rather than LSU’s medical school because of the budget uncertainty.
“It is unacceptable that we are losing some of the best and brightest people out of state, unacceptable. We need to stop this,” Ghali said.
The House intends to consider additional tax proposals Monday, while the Senate will continue to review the tax hike ideas it’s already received.