State senators cracked open the Louisiana House’s version of the nearly $25 billion state spending plan Thursday and immediately raised questions.
Members of the state Senate Finance Committee focused their concerns on a planned tax amnesty program, severance tax adjustments and the TOPS program.
State Sen. Fred Mills characterized one piece of the plan that the House advanced as almost looking like a pay day loan, referring to a transaction in which someone gets immediate cash but eventually loses money on the deal.
Another senator questioned whether the House really can claim to have purged one-time, or nonrecurring, dollars that balanced the version of the budget unveiled by the governor in February.
As the budget bill’s sponsor, state Rep. Jim Fannin sat before the committee and briefed members on the spending plan for the fiscal year that starts July 1. Fannin, D-Jonesboro, made it clear that big changes were made to the bill he filed on the governor’s behalf.
He compared the proposal that got rewritten on the House floor to a bus, saying it picked up hitchhikers who then ordered dinner.
“In the past I’ve always gotten you a bill that had no flaws in it whatsoever. This one you might check it out a little bit more,” he cautioned the Senate Finance Committee.
The state was short $1.3 billion in the money needed to keep state government expenses at their current levels in the upcoming budget year. State sales tax collections are flat and huge funding cuts were made by Congress to the Medicaid program that provides health care to the poor.
Gov. Bobby Jindal proposed a budget that relied on nearly $500 million in property sales, legal settlements and other one-time dollars to help fund the state’s public colleges and universities. Higher education also would get a boost by increasing tuition.
Unhappy with the budget plan, Democrats and Republicans in the House sat down and drew up their own version. They had enough political muscle to push the new spending plan to the Senate, which now has the opportunity to make changes.
The bipartisan plan banks on a tax amnesty program generating $200 million, revamping severance taxes and other adjustments.
David Ray, senior budget analyst for the state Senate, told legislators Thursday that not enough money was put into the TOPS program.
The Taylor Opportunity Program for Students, or TOPS, provides state-funded college tuition to students who meet certain benchmarks. The state is expected to spend $204 million on TOPS to provide tuition assistance to 49,000 students in the upcoming fiscal year.
Ray said the program is short $10 million this fiscal year and at least $13 million next fiscal year.
State Sen. Fred Mills, R-St. Martinville, said the state seems to spending an increasing amount of money on TOPS.
Ray said by the fiscal year that starts July 1, 2017, the state’s TOPS obligations will surpass $300 million a year.
The TOPS funding problem surfaced during a committee presentation on changes to the budget bill. Sherry Phillips-Hymel, the state Senate’s chief budget analyst, spent several hours guiding legislators through the Powerpoint with the help of a state economist and other financial experts.
A big part of the House plan is an amnesty program that would encourage 300,000 taxpayers with outstanding state tax debts to settle with the state.
Taxpayers would be given two years to do so. In the first year, all penalties and interest would be forgiven if tax bills are paid in full. In the second year, a 50 percent discount would be offered on penalties and interest.
“It’s one-time money,” complained state Sen. Greg Tarver, D-Shreveport, adding that the House seemed to pull the amount expected to be generated out of the air.
Another component of the House plan would target oil and gas wells that currently receive a five year exemption on severance taxes when minerals are extracted after two years of inactivity. The House wants to eliminate the exemption and create new tax rates. The change would generate money in the short term for the state while saving the oil and gas industry money in the future because the new rates would be lower than what they would be when the exemption expired.
“It almost looks like a pay day loan. It’s going to look good for a little while,” Mills said.
The committee will continue to look at the budget Friday.