DENHAM SPRINGS – Another steep budget deficit could make the upcoming regular session one of the most challenging yet, a local member of the state delegation said Thursday.
State Sen. Dale Erdey gave a preview of the 2017 regular session during his visit Thursday to the Denham Springs Kiwanis Club.
“This is going to be a very difficult session,” said Erdey, R-Livingston. “I say that because there are going to be a lot of people who are going to be hit by what comes out of this session.”
The session, as with all in an odd-numbered year, will strictly focus on fiscal issues.
The budget session will bring the task of closing a $400 million gap for the 2018 budget, but a tougher battle looms on how to tackle a “fiscal cliff” when the temporary one-cent sales tax reaches its sunset June 30, 2018.
Higher taxes and elimination of credits and tax exclusions will likely play a big role in the efforts to fill the void.
The fiscal woes come as the state moves into a ninth consecutive year as deficit spending.
“It was difficult last year with a tax hike on a table, and actually the last three sessions were among the most difficult,” Erdey said. “This one will be as tough – maybe tougher.”
The expiration of the one-cent sales – which lawmakers approved in a Feb. 2016 special session – will trigger a $1 billion shortfall.
Erdey does not foresee a renewal of the temporary tax, something of a rarity in government.
“It’s regressive … it’s not a good tax,” he said. “The sales tax hasn’t brought in as much money as anticipated, and the personal and property taxes haven’t been as strong, either.”
The loss of jobs in the wake of a plunge in oil prices has contributed to the dip in tax revenue, along with layoffs in support jobs for the oil industry.
The collapse in oil prices led to a crippled job market which continues to suffer since the start of its decline in 2014.
“The jobs we’ve added aren’t high paying jobs, so personal income tax revenues have declined,” Erdey said. “Corporate taxes are down, personal income taxes are down and we’re still in a deficit mode.”
The repeal of the Stelly Plan put the fiscal slump in motion.
Voters in 2002 approved the plan by Lake Charles Republican Rep. Vic Stelly, which lowered state sales taxes on utilities and food for home consumption. The reduction in the sales taxes came as an exchange for higher state income taxes.
The higher receipt on personal income taxes yielded a growth in state revenue, but a $2 billion surplus – padded heavily by federal relief funds for Hurricane Katrina – promoted Shreveport GOP Rep. Buddy Shaw to push a repeal of the Stelly Plan.
Voters approved a move to take the Stelly Plan off the books, but state lawmakers resisted an increase on property taxes.
“We ended up with a partial repeal,” Erdey said. “The state shot itself by not giving the other money back, even though nobody had a crystal ball that would tell us about the drop in oil prices which would follow.”
Erdey also criticized federally implemented mandates on distribution of relief money for victims of the August flood.
The $438 million in the first round of relief will only aid the poor, elderly and uninsured.
Erdey would prefer a proportionate basis for fund distribution rather than helping only the impoverished.
“Certainly we want to help the needy and low income, but you have people in the working class who help pay for these benefits, and they’re being left out the equation,” he said.
He also voiced frustration over the lack of progress on the Comite River Diversion Canal, which first went on the drawing board in 1985.
Funding for the project, which diverts water from the Comite River to the Mississippi River as a flood deterrent, topped discussion in 2000 when Erdey first took office a state representative during the reign of Gov. Mike Foster.
The federal government declined to pay for the project, nor did the state budge.
“Foster said locals had to help, which was a tactic to say that if the locals don’t do their part, the state would not,” Erdey said.
Voters in Livingston, East Baton Rouge and Ascension parishes approved the 2.65-mill property tax in 2000 – much to Erdey’s surprise – and renewed it in 2010.
Nearly 20 years after the millage went on the books, the project remains stuck in the initial phase.
“The state has done its part and the locals are doing their part by taxing themselves, but we have only one state that is done – Lilly Bayou,” Erdey said. “It’s ridiculous how slowly this is moving.
“With the federal government, it takes forty years for a project to move from its inception to fruition,” he said. “Judging from the start of the project being 1985, we’re right on track.”
Erdey hopes the Trump Administration will adhere to the recommendation by Governor Edwards to approve fund to complete the project.
“These projects are worthy and certainly deserving for the people of Louisiana,” he said.