Louisiana Spotlight: Tax amnesty adds questions to budget plan

When lawmakers applauded their bipartisan budget compromise, they forgot to mention the uncertainties about whether the $25.4 billion spending plan will stay in balance.

A large question mark remains about how much the state will collect from a three-year tax amnesty program, under which delinquent taxpayers can pay overdue taxes with penalties and interest reduced or eliminated.

Amnesty is used as a way to generate upfront cash for the budget, and the 2013-14 state operating budget that takes effect July 1 assumes $200 million will roll in during the first year of the program.

The Legislature’s financial analysts didn’t come up with that figure and didn’t say they expect that much money to show up the first year, saying collection rates were unclear.

But lawmakers plugged the funds into the budget anyway to pay health-care services.

Now, the waiting game begins, with the state’s Medicaid program that takes care of the poor, elderly and disabled on the chopping block if the money doesn’t pan out.

The $200 million anticipated from tax amnesty was included in the portion of the Department of Health and Hospitals budget that pays private health-care providers for caring for Medicaid patients.

The money is used to draw down federal Medicaid matching dollars, so if some of the money doesn’t arrive as expected, the health-care funding loss is multiplied.

Lawmakers didn’t come up with the tax amnesty idea. The House swiped it from Gov. Bobby Jindal’s failed tax rewrite plan and used it to replace some of the one-time, patchwork dollars proposed by the Republican governor to balance next year’s budget.

A group of conservative House Republicans, nicknamed the “fiscal hawks,” blame the use of piecemeal financing — from such things as legal settlements and property sales — for creating cycles of budget problems when dollars fall away and must be replaced.

In a budget deal with House Democrats, the fiscal hawks agreed to the tax amnesty program even though it seemed like a short-term solution similar to the one-time money they derided. Lawmakers said it was more-stable funding because the amnesty program would be spread over three years and would generate tax dollars already owed to the state.

Rather than seek to make cuts by removing the amnesty money, senators kept those dollars in the final budget compromise with the House, even though members of the Senate Finance Committee had questioned whether the $200 million would appear.

In a budget hearing, Sen. Greg Tarver, D-Shreveport, had questions about tax amnesty.

“With your experiences, would you use the figure of $200 million to budget, or less?” Tarver asked Greg Albrecht, chief economist for the Legislative Fiscal Office.

“I actually wouldn’t use a figure to budget at all, senator,” Albrecht replied.

Tarver responded, “Are you just saying they pulled a figure from the air and utilized it?”

“I don’t know where the figure came from,” Albrecht answered.

Rep. Joel Robideaux, R-Lafayette, sponsor of the amnesty bill, said he looked at the state’s experiences with a previous tax amnesty program passed in 2009, along with the outstanding tax debts that could be collected, to devise an estimate.

The way the amnesty program is crafted allows for three different amnesty periods over three years. Lawmakers should know if they hit the $200 million mark from the first amnesty period by December or January.

They wait with fingers crossed.

Melinda Deslatte covers the Louisiana Capitol for The Associated Press. She can be contacted at mdeslatte@ap.org.