Edwards releases tax proposals to balance Louisiana budget

BATON ROUGE — Gov. John Bel Edwards proposed a broad array of tax hikes Tuesday on shoppers, smokers, phone services, business utilities and more, saying Louisiana needs to bring in more money to steady its finances and end the cycles of perpetual budget crises.

The Democratic governor said his predecessor, Republican Bobby Jindal, left the state’s budget in such disarray that hundreds of millions of dollars in tax increases would be needed to keep public education and health care programs from devastating cuts.

But Edwards said if lawmakers agreed to the money-raising ideas in a special legislative session expected to begin Feb. 14, the state would emerge on a more sound financial footing.

“This is not exactly the press conference that I want to be hosting one week into my administration,” Edwards said. “The fact of the matter is we have the largest budget shortfall our state has ever faced.”

The Edwards administration estimates Louisiana has a more than $700 million shortfall in the remaining five months of the $25 billion budget that ends June 30, and a gap reaching as much as $1.9 billion next year.

Jindal and lawmakers didn’t include enough money in this year’s budget to cover the programs included in the spending plans. On top of that, Louisiana is expected to bring in less tax income than projected when the budget was built, partially due to plummeting oil prices.

The new governor offered a two-pronged approach: a list of recommendations to close this year’s budget hole and a broader “menu of options” for lawmakers to sift through for ways to close next year’s shortfall.

Both lists would have Louisiana’s residents and businesses paying more out of pocket to cover government programs and services.

To solve the immediate problem, Edwards wants to take $128 million from Louisiana’s “rainy day” fund; cut 10 percent from areas of the budget that have been protected from reductions; and redirect $200 million in oil spill settlement money currently earmarked to other items.

Most noticeable to state residents would be Edwards’ proposal to raise the state’s 4-cent sales tax by another penny on every dollar spent. 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.

To get the money quickly to rebalance this year’s budget, Edwards’ revenue secretary Kimberly Robinson said the sales tax hike would kick in April 1 under the proposal.

“I am serious when I say that raising taxes would not be my first, second or third option,” Edwards said. But he added later: “The need for additional revenue is now, and it’s acute.”

Edwards’ top financial adviser, Commissioner of Administration Jay Dardenne, said the administration hoped the sales tax increase would be a “short-term bridge” and wouldn’t be a permanent tax hike.

To stabilize the long-term budget problems, Edwards is proposing increased cigarette, telecommunications and business utility taxes and continued across-the-board cuts to tax-break programs, among a long list of ideas.
He described the list as a “menu of options,” for lawmakers. But the governor also said he expects many of them will need to be adopted to address the budget gap.

While Republicans have called for a mix of cuts and new revenue, Edwards estimated “we need to get close to” $1.9 billion in new revenue for next year’s budget.

Ahead of the governor’s news conference, GOP Treasurer John Kennedy released a statement saying while the “budget has been mismanaged for many years,” tax hikes weren’t the answer.

“I don’t envy any public official who walks into office with a $1.9 billion budget hole to fill, but they had better be careful trying to fill it by burdening our citizens with higher taxes. Many of our people are living at the margins right now,” Kennedy said.