House Bills 464, 467

To the Members of the House Appropriations Committee, 

My name is Jan Moller, and I’m the executive director of the Louisiana Budget Project, a nonprofit policy research and advocacy organization focused on lifting up low- and moderate-income families. I would like to be here in person to testify, but the social distancing recommendations from the White House and our governor, and my concern for my family’s health, compel me to stay away from the Capitol. 

I write in opposition to House Bill 464, and its companion bill, HB467. The bill limits the expenditure growth to 5% each year, and requires a two-thirds vote in each chamber to exceed that amount. 

The current expenditure limit has been in place since the 1990s. It includes an annual growth factor that is tied to the three-year growth in personal income. While it is not perfect, it has served its purpose – particularly in the aftermath of Hurricane Katrina, when Louisiana’s overheated reconstruction economy produced record revenue growth. 

This amendment would replace that growth factor with the blunt instrument of a 5% constitutional cap. You need to look no further than the current pandemic to understand why this is a bad idea. 

While we won’t have exact numbers from the Revenue Estimating Conference until next week, Louisiana is most likely entering a period of extreme revenue volatility. The FY21 revenue forecast will be much bleaker than anyone expected two months ago. Moody’s Analytics recently predicted that Louisiana would experience a 25% reduction in state revenues during a severe recession, like the one we’re about to experience.   

From these economic depths, Louisiana can likely expect a period of rapid growth as the economy returns to normal. With this amendment, you would almost certainly need a two-thirds vote to pass a budget when growth picks up – essentially handing veto power to a minority of members in either house.  

Louisiana already has an expenditure limit. And it has a duly elected body, the state Legislature that has the power, each year, to decide how much money the state should spend, and where to allocate those resources. All it takes is a majority vote. By approving this amendment, you would be handing that all-important power of the purse to a minority of members – not just for yourselves, but for the people who come after you.  I urge you to reject these bills. 

 

House Bill 118

To the Members of the House Appropriations Committee, 

My name is Jan Moller, and I’m the executive director of the Louisiana Budget Project, a nonprofit policy research and advocacy organization focused on lifting up low- and moderate-income families. I would like to be here in person to testify, but the social distancing recommendations from the White House and our governor, and my concern for my family’s health, compel me to stay away from the Capitol. 

I write in opposition to House Bill 118. This bill would cap annual appropriations at 98% of the state general fund (direct) forecast. This was a bad idea during the best of times, and it is an even worse idea today, when our state faces an unprecedented economic crisis that threatens the state’s ability to provide basic services. 

Two percent doesn’t sound like a lot, but it is. In Fiscal Year 2019, state general fund revenues came to a little over $10 billion, according to the Legislative Fiscal Office. Two percent is about $200 million that the Legislature would be leaving on the table. Let’s look at what that buys us in the governor’s proposed budget:

  • It’s more than the entire general fund allotment for the Executive Department ($143 million), 
  • It’s almost four times as much as we plan to spend on the Secretary of State in FY 21 ($54 million). 
  • It’s about six times the annual general fund budget of Louisiana Economic Development. 
  • It’s nearly 40% of what Louisiana plans to spend on corrections next year. 

Let’s not kid ourselves. We know Louisiana is going to fund its prisons, its executive department and the November elections. When cuts have to be made, they will come mainly from two areas: health care and higher education. 

Because of the coronavirus pandemic, Louisiana is likely to face a budget crisis unlike any it has confronted since at least the mid-1980s. Finding adequate funding for our hospitals, universities and first responders will be hard enough without taking up to $200 million off the table. 

This is not to suggest that the Legislature shouldn’t build up the state’s reserves during good financial times. A healthy rainy-day fund is a hallmark of good budgeting. And if the Legislature decides in a given year that it doesn’t want to spend up to the official forecast, all it would take is a simple majority vote in each chamber. But this bill would tie the Legislature’s hands at the worst possible time, and I urge you to reject it.  

 

House Bill 506

To the Members of the House Ways & Means Committee, 

My name is Jan Moller, and I’m the executive director of the Louisiana Budget Project, a nonprofit policy research and advocacy organization focused on lifting up low- and moderate-income families. I would like to be here in person to testify, but the social distancing recommendations from the White House and our governor, and my concern for my family’s health, compel me to stay away from the Capitol. 

I write in opposition to House Bill 506, which would reduce the severance tax rate on oil. 

According to the fiscal note on this bill, the total five-year cost to the state would be $140 million. That’s money that would not be available to fund health care services, educate our children or pay the police officers who keep our communities safe. 

LBP is sympathetic to the suffering of Louisiana’s oil industry caused by the recent drop in global prices. But just as the price of oil has dropped, it will surely rise again and create market incentives for companies to explore and produce. 

The financial downturn resulting from the pandemic is likely to be severe. Even without this bill, Louisiana will have trouble raising enough revenue to maintain its commitment to children, to college students, and to people who need healthcare services but cannot afford to pay. Recognizing this, U.S. Sen. Bill Cassidy is co-sponsoring important legislation that would provide $500 billion in much-needed fiscal relief for states and municipalities. 

Louisiana would undermine its case for receiving this much-needed stabilization funding if it decides to use this moment to pass an ill-advised tax cut. 

A better solution would be to wait until the pandemic has passed, when a thoughtful public conversation can take place about the most appropriate framework for taxing oil production.Â