04/07 - Legislative Priorities 2007

As the Louisiana Legislature gets set to convene next week, what are the priorities for the upcoming session?

Should we spend our money on roads, education or something else? Join us for a look at the issues that will be drawing the most attention of lobbyists, legislators and voters in the upcoming session of the Louisiana Legislature. LPB President Beth Courtney and LSU Media Law Professor Craig Freeman are your hosts.

Panelists:

* Gov. Kathleen Blanco
* Sen. Gerald Theunissen (R), District 25
* Barry Erwin, President of Council for A Better Louisiana [CABL]

Here's how you can follow what's going on during the 2007 Legislature: To read the actual bills that are being proposed, check their status and view legislative hearings, go to http://www.legis.state.la.us

* To call House members: 225-342-6945
* To call senators: 225-342-2040
* To call the Governor's office: 225-342-7015

For information on key issues facing Louisiana go to: Council for A Better Louisiana http://www.cabl.org and the Public Affairs Research Council [PAR] at http://www.la-par.org

Some say ethics will be a hot topic during the legislative session. Check out LA Ethics 1 at http://www.laethics1.com/ to see what a coalition of business, economic development and good government groups hope to achieve. They claim the effort is critical to the future economic development of the state.

Backgrounder

On April 30th, the 2007 Louisiana legislature will begin a 60 day fiscal session. These sessions occur every other year, and most – but not all – of the bills introduced deal with money issues. The state budget drawn up by the administration for the fiscal year 2007 -2008, totals 29 billion dollars. This sets a record for Louisiana, exceeding the current year budget approved by lawmakers in the 2006 session by $2.5 billion. It includes $8 billion in federal relief money for costs associated with hurricanes Rita and Katrina.

For many legislators, this session will be different from any they've ever experienced. That's because the state's coffers are awash in money related to storm recovery. Tax revenues have soared because of money being spent on building materials, home furnishing replacement, big-ticket item replacement and other expenses caused by the storms of 2005. A construction boom has also generated revenue. High oil prices have added to the treasury, too, through increased severance taxes.

Deciding on how to deal with the money is the task of the legislators. Rep. Jim Tucker (R), Jefferson Parish, says he feels strongly that, "A good chunk of the money ought to go back into the private sector through tax reductions, to be used in the recovery and the natural expansion of the private economy, as opposed to being spent by the government." Tucker is especially worried about recurring expenditures, like salaries, becoming a drain on government in future years.

While the executive budget includes about $148 million in tax cuts, hundreds of millions of new dollars will go into improving education, from pre-K through college.

The Commissioner of Administration manages state government on behalf of the governor. Jerry Luke LeBlanc, the current Commissioner, says that the governor's pay raise initiative for teachers, school workers, college faculty and state workers are all funded with recurring money.

Just what are "recurring "versus "non-recurring" dollars will be a topic of much debate during the session.

At the top of governor Blanco's agenda is increased funding for education – about $610 million to cover pay raises and to fully fund education for the first time since 1981. Health care spending would increase by $500 million, funding primary care and preventive care programs. Payments to health workers who treat Medicaid patients would increase.

The budget picture is complicated somewhat by about $3 billion in "extra" money.
Commissioner LeBlanc explains: "You have $827 million that's on the 05 – 06 fiscal year. At the close of books, that was what was identified as surplus. Then you have an additional $1.2 billion in the current fiscal year, by increased revenue estimate." To that $2 billion, the administration wants to put about $1.2 billion more on the table as increased revenue estimate for the 2007- 2008 fiscal year.

Some legislators do not believe that these "extra" dollars are coming from a "real" or sustainable economy. They argue that the recovery-related tax income will fade in the coming years, leaving the state holding the bag for any recurring costs it obligates itself to now.

Others, like LeBlanc, say that the administration's budget requests are based on sound revenue projections. "All of these can be sustained and maintained over many years, because our construction economy is really just beginning. In every economic model that we've taken a look at, it will be five to ten years that we can experience the kind of uptake that we have now."
The following figures and comments were provided by the Coalition for A Better Louisiana [CABL}. Special thanks to Barry Erwin.

Governor Blanco's Budget Proposal
Available Revenues for 2007-2008 Budget

Fiscal Year 2006 Surplus
Fiscal Year 2007 Excess General Fund
Fiscal Year 2008 Increased General Fund

Available State General Fund


$ 827 million
$1.2 billion
$1.3 billion

$3.3 billion

2006 Surplus $ 827 million
• Roads $ 450 million
• Coastal Restoration Fund $ 200 million
• Steel Mill Project $ 100 million
• Higher Ed Deferred Maint $ 77 million

2007 Excess General Funds $1.2 billion
• Medicaid Trust Fund $ 330 million
• Health Care Redesign $ 200 million
• FEMA Match $ 78 million
• IT Projects $ 34 million
• Housing Programs $ 25 million
• NASA/Michoud Equip. $ 20 million
• Interoperability $ 12 million
• Family Recovery Corps $ 10 million
• Other $ 62 million
• Supplemental Needs $ 156 million
Total $ 927 million
Excess Funds Remaining $ 295 million

2008 General Fund $ 1.3 billion
Salary Increases
• Teacher Pay ($2,375) $ 158 million
• Higher Ed $ 30 million
• Support Workers $ 34 million
• State Employees $ 143 million
• Corrections $ 35 million
• State Police $ 3 million
• Supplemental Pay $ 28 million

Total $ 430 million

Higher Education
• Full Formula $ 98 million
• Flexible Funding $ 17 million
• Mandated Costs $ 33 million
• Library & Equip. $ 12.5 million
• Hurricane Campuses $ 10 million
• LCTCS Development $ 2 million
• Workforce Development $ 13 million
• Scholarships $ 15 million
• Dual Enrollment $ 3 million
• Student Loan Guarantees $ 4.5 million
• LITE $ 3.2 million
• Pennington $ 3 million
• ULM Pharmacy $ 1 million

Education
• MFP Increase $ 155 million
• LA-4 Pre-School $ 30 million
• High School Redesign $ 13 million
• Type 2 Charter Schools $ 1.4 million
• Summer School $ 4.8 million
• New Orleans Principals $ 1 million

Health Care
Increase Payments to
• Private Providers $ 401 million (Includes pay increases, waivers, and health care redesign)
• Increased Medicaid $ 76 million
• UCC Continuation $ 17 million

Smaller Increases or Continuation of New Funding in Programs:
• Social Services
• Juvenile Justice
• Economic Development
• Culture, Recreation & Tourism
• Public Safety
• Transportation
• Indigent Defense

Proposed Tax Cuts
• Child Care Tax Credit $ 45.7 million
• 5-Day Sales tax Holiday $ 6.8 million
• ½ -Cent Utilities Sales Tax $ 36 million
• School Readiness Tax Credit $ 44.4 million
• LED Tax Incentives $ 4.6 million
Total Tax Cuts $ 133 million

Expenditure Limits

Official Expenditure Cap for 2006-2007
Calculated Growth Factor
Expenditure Cap for 2007-2008


$10.3 billion
12.42%
$11.6 billion

Controversy:
There is a constitutional formula that determines the annual spending cap. It is determined by averaging the personal income growth in Louisiana for the prior three years and applying that percentage of growth to the previous year's budget. However, the governor's budget is required by law to be submitted prior to the time that the fourth quarter personal income data is made available by the federal government. To deal with that lack of data the state developed another formula which has been widely accepted and in use for many years to estimate the missing fourth quarter personal income growth and apply it to determine the spending cap.

It has worked well over the years, but this year, because of an anomaly caused by the spike in economic activity caused by the hurricanes, it predicted a skewed 70% increase in personal income in the fourth quarter, which in turn inflated the increase in the spending cap to $1.3 billion. The actual fourth quarter personal income data for Louisiana is now available. When those numbers are applied to the formula it creates a much lower increase in the spending cap: $547 million.

Other Issues
• Ethics
• Insurance
• Building codes
• Attempts to repeal all or parts of Stelly Plan
• Eliminate state sales tax on utilities for business
• Immediately eliminate business taxes currently being phased out
• Health care
• Cockfighting

Lobbyist Jim Nickel points out several other factors that will make this session one like no other. "We have a governor who's an announced lame duck; we have an election year. Those are both a little bit unusual for sessions. And then you throw in term limits, which we've never had, and new partisanship that seems to be developing within the capitol. Those four elements create a lot of anxiety for people that are trying to get laws passed, or trying to kill bad laws that may be proposed. And then you've got this surplus out there and everybody trying to grab the money."

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