Gov. John Bel Edwards and state lawmakers sang the tune of optimism when they shored up a $304 million budget deficit on the final day of the 10-day special session.
The agreement to combine budget cuts with a $99 million dip into the state’s Rainy Day Fund gave lawmakers hope of brighter days ahead.
It could also signify the calm before the storm.
A far bigger challenge awaits lawmakers when they return to Baton Rouge for the regular session April 10.
Lawmakers will face a $400 million continuation deficit for next year, but it’s only the tip of the iceberg. The one-cent sales tax lawmakers approved last year expires June 30, 2018.
Expiration of the tax will leave a $1 billion hole in the state budget, which some lawmakers call “the fiscal cliff.”
Renewal of the tax is highly unlikely, which will force lawmakers to implement deep cuts in the budget and force them to grind out a tax reform plan, a measure long overdue for the state.
Tax reform could involve a retooling of tax brackets. A bigger step may involve the reworking of the tax incentive programs the state has used to lure large corporations to set up shop in Louisiana.
The tax incentive program has brought billions of dollars in economic development for the state, but the state has given away more revenue than it has received through the tax credits.
Proponents will allude to its benefits for areas along the Mississippi River’s petrochemical corridor, along with pockets of development in the New Orleans area and the mammoth boom in industrial development in the Lake Charles area.
State lawmakers will need to determine if it’s still feasible to give away the house and farm for additional jobs, even if not all of them put Louisiana residents on the work rolls.
A move toward tax reform – the measure lawmakers have dodged in recent years – could make a huge difference for the state. It could shift the state from budget deficits toward fulfilling needs and goals to move Louisiana forward.
The route to a compromise on the potentially divisive issue could lead to one of the most contemptuous sessions in many years.
A much steeper hill awaits lawmakers when they return to the Capitol in April. Considering the dire consequences the fiscal cliff could deal the state, lawmakers will need to embrace compromise more than ever.