Facing budget woes 'bigger than our state has ever seen,' Gov. John Bel Edwards proposes tax hikes, other options

Gov. John Bel Edwards has offered up a menu of potential actions he says would stabilize the state budget — both in the short term and for the future:

The state could increase its 4-cent sales tax by a penny, starting in April, and bring in $216 million more for the fiscal year that ends June 30.

Millions more could be brought in if the cigarette tax is hiked an additional 22 cents above the 86-cent tax rate state lawmakers approved last year.

Corporate income taxes could be overhauled to address a recent slump in payments.

Personal income tax brackets could be adjusted to bring in more revenue.

On Tuesday, Edwards and his chief budget advisers — Commissioner of Administration Jay Dardenne and Department of Revenue Secretary Kimberly Robinson — outlined those and several other suggestions for addressing the $750 million budget shortfall in the current fiscal year and the roughly $1.9 billion budget shortfall anticipated in the budget that begins July 1.

Much of the recommendations rely on bringing in new revenue through tax increases and other measures. Edwards, a Democrat who won a bitter election battle against U.S. Sen. David Vitter in November, didn’t openly advocate for higher taxes on the campaign trail, focusing instead on efforts to scale back some tax credits and remove structural dedications from the budget to address the state’s fiscal crisis.

But in recent weeks, his administration has signaled that hikes were going to be recommended.

“This is not the budget plan I wanted to bring in my second week in office, but these problems are bigger than our state has ever seen,” said Edwards, who was sworn into office last week. “Raising taxes would not be my first, second or even third option when seeking to fill the state’s budget shortfall, but when the facts change, so do your options.”

Ultimately, it will be up to the Republican-controlled state Legislature to decide which route is taken to shore up the budget, and Edwards will need to cobble together a broad coalition to advance his proposals. Tax increases, as well as rollbacks of existing tax credits, will require approval from two-thirds of the members in each chamber of the Legislature.

Edwards argued that, once he got into office, his administration discovered that few other options remain. “We’ve reached the end of the rope,” he said.

Edwards is expected to call a special session Feb. 14 to tackle the looming fiscal crisis. The Legislature’s regular session begins March 14.

House Speaker Taylor Barras, a New Iberia Republican who won the chamber’s top leadership post over a Democrat backed by Edwards, didn’t respond to The Advocate’s requests for comment on the recommendations Edwards outlined Tuesday.

Edwards said he had spoken to Barras but revealed little about their discussion. “(Barras) certainly knows that we cannot address the problem without raising revenue,” Edwards said.

It’s unclear how willing Republicans in the House, in particular, will be to go along with ideas like increasing the sales tax.

House Majority Leader Lance Harris, an Alexandria Republican, said the delegation’s members will discuss Edwards’ proposals, as well as their own, in the coming weeks.

“We haven’t had a chance to digest a lot of what he presented today,” Harris said Tuesday, shortly after Edwards’ presentation. “As a delegation, I know we’re working through our own process and attempts to come up with solutions.”

Harris wouldn’t speculate how members might take to the various ideas Edwards has put forth.

“I think everybody knows the monumental problem that we face,” he said. “Everybody that we’ve talked to, across the aisle, is committed to fixing this problem. I think that everybody is ready to get to work.”

Edwards has frequently criticized former Republican Gov. Bobby Jindal’s handling of the budget. He alluded to some of those issues Tuesday, including the Jindal administration’s reliance on one-time revenue sources to plug holes in the budget.

“The days of using budget gimmicks that have allowed us to limp along are over,” Edwards said. “This administration will remove the smoke and mirrors and provide the facts about where we are.”

Dardenne, a Republican who serves as Edwards’ chief budget architect, had indicated that some tax increase recommendations would be forthcoming as the administration looks to sort out the state’s fiscal situation.

Other recommendations that Edwards’ administration have put forth include tapping into the state’s rainy day fund and redirecting $200 million in noncoastal dollars Louisiana received from the BP oil spill settlement toward the current $750 million gap.

For the long term, the Edwards’ administration is pushing for several tax credit rollbacks that the Legislature approved last year to become permanent, rather than expiring in three years, and an increase in taxes on alcoholic beverages that would bring the state to the national average.

The 1-cent sales tax hike, Dardenne said, would serve as a temporary “bridge,” but he admitted that the administration is not asking for an automatic end date in legislation. It would not apply to purchases that are exempted under the state constitution, like groceries and prescription drugs.

Robinson said the state could begin collecting the additional sales tax as soon as April 1, if state lawmakers sign off on the proposal.

“That’s a tax that’s available relatively soon,” she said.

Follow Elizabeth Crisp on Twitter, @elizabethcrisp. For more coverage of Louisiana state government and politics, follow our Politics blog at http://blogs.theadvocate.com/politicsblog .

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