The Louisiana Senate on Sunday (June 3) will take up a budget proposal that fully funds the TOPS college scholarship program, hospitals for the poor and uninsured, prisoner housing, nursing homes and several other state services that have been on the chopping block for months. The catch: The plan relies on $140 million more in tax revenue than the Louisiana House has agreed to raise so far.
The Senate Finance Committee's version of the budget, released Saturday, also assumes the Legislature will agree to use $53.3 million in BP oil spill money to cover Louisiana government operating expenses and that the Louisiana Department of Health can achieve $66.7 million worth of savings by making some programmatic and accounting adjustments in the Medicaid program. That's in spite of the fact that the health agency's chief financial officer has already expressed concern about budgeting based on those changes.
Yet the biggest sticking point is likely to be how high sales taxes will remain in another month.
The Senate Finance budget relies on $540 million worth of renewed taxes. So far, the House has agreed to raise only $400 million of that money, and the full Senate hasn't voted on any tax proposals yet. That could lead to a showdown between legislators who want to fund popular government services and those who want to keep taxes lower than that type of spending will allow.
"You can only spend what you have," said Senate Finance Chairman Eric LaFleur, D-Ville Platte.
In spite of the higher taxes, the Senate Finance budget plan also doesn't avoid spending cuts altogether. The proposal calls for an across-the-board 5 percent reduction to most agencies' allocation from the state general fund -- flexible tax revenue that can be used for almost any government purpose.
That 5 five percent cut will mean different dollar amounts to different agencies. The Senate Finance spared public universities, TOPS, and the Department of Children and Family Services from having to take a 5 percent general fund reduction at all. Others, such as the Department of Wildlife and Fisheries, rely on no general fund money and therefore won't see a reduction. Others -- including the secretary of state, Department of Education and attorney general -- are slated to take hits to their budget.
In total, the Senate Finance Committee says its spending plan will still amount to $56.4 million worth of reductions, though exactly where they will come from isn't yet clear. The Senate Finance's budget plan allows Commissioner of Administration Jay Dardenne, the governor's budget chief, to dictate where those 5 percent general fund cuts fall in the agencies that receive them.
The Senate Finance plan also accounts for government program increases in some areas. It sets aside more than $9 million for prison guard pay increases that correction officials say they need to keep their staff in positions longer. It also puts $12 million toward opening the Acadiana Center for Youth, a newly built juvenile detention facility that has yet to open because the state hasn't been able to afford to staff it.
The Senate Finance plan also earmarks an extra $1 million for the foster care system so students can stay in that system until they graduate from high school or reach the age of 21, whichever comes first. Currently, Louisiana kicks people out of foster care when they turn 18, even if they don't have a high school degree yet. Some of those young people end up homeless and have a hard time finishing school.
The plan also puts $2 million to a "raise the age" initiative, which will allow 17-year-olds to be treated as juvenile offenders instead of adults by the criminal justice system.
In the event the Louisiana Department of Health cannot achieve the $66.7 million in savings that is baked into the budget plan, the Senate Finance members have also added language to the spending proposal requiring health officials to look at cutting areas other than mental health services, substance abuse treatment and pediatric day care to make their budget work. Those areas of spending had all been eliminated in the House budget proposal passed earlier this week.
Jeff Reynolds, the chief financial officer of the Health Department, has said at least $21 million of the $66.7 million in savings the Senate Finance Committee expects is questionable.
That savings is based on the state tightening the restrictions for initially qualifying for Medicaid. Currently, Louisiana assumes a person is eligible for Medicaid if they make up to 25 percent more than the income threshold. Conservative legislators have pushed for that income requirement to be dropped to 10 percent above the threshold. Lawmakers assume that will save the state in Medicaid spending, but Reynolds said he is unable to determine how much that might be. On Friday, he told lawmakers he was worried about including those savings at all.
Louisiana is facing a budget crisis because more than a billion dollars of state taxes are set to expire June 30. The primary driver of the loss of revenue is an automatic drop in the state sales tax rate from 5 percent to 4 percent.
The House has voted to keep a 4.3 percent sales tax rate and continue to eliminate some old sales tax exemptions after June to avoid devastating budget cuts. The sales tax rate for business utilities, which was supposed to drop to nothing, would also be 2 percent after June 30 under that proposal.
The Senate Finance budget plan -- which funds TOPS, prisoner housing and health care services at levels the House budget does not -- assumes a 4.5 percent sales tax rate, higher than what the House Republican leadership wants to approve. Gov. John Bel Edwards, a Democrat, has also been pushing for a 4.5 percent rate after June 30.
The Senate and House must quickly get on the same page. The Legislature is supposed to have a budget plan for the next fiscal year passed by Monday at midnight, when its current special session ends. If no budget is in place by then, lawmakers will have to come back for another session before July 1, when the next budget cycle starts.