Analysis: Tax amnesty creates new budget questions
MELINDA DESLATTE,Associated Press
BATON ROUGE, La. (AP) — When lawmakers applauded their bipartisan budget compromise, they forgot to mention the uncertainties about whether the $25.4 billion spending plan will stay in balance.
A large question mark remains about how much the state will collect from a three-year tax amnesty program, under which delinquent taxpayers can pay overdue taxes with penalties and interest reduced or eliminated.
Amnesty is used as a way to generate upfront cash for the budget, and the 2013-14 state operating budget that takes effect July 1 assumes $200 million will roll in during the first year of the program.
The Legislature's financial analysts didn't come up with that figure and didn't certify that they expect that much money to show up in the first year, saying the collection rates were unclear.
But lawmakers plugged the dollars into the budget anyway to pay for health care services.
"Whether the budget will pass the ultimate test of preventing another round of mid-year budget cuts is still very much in doubt due to the tax amnesty proposal. How it will work out is still very much up in the air," Dan Juneau, president of the Louisiana Association of Business and Industry, wrote in his summary of the legislative session.
Now, the waiting game begins, with the state's Medicaid program that takes care of the poor, elderly and disabled on the chopping block if the money doesn't pan out.
The $200 million anticipated from tax amnesty was included in the portion of the Department of Health and Hospitals budget that pays private health care providers for caring for Medicaid patients.
The money is used to draw down federal Medicaid matching dollars, so if some of the money doesn't arrive as expected, the health care funding loss is multiplied.
Lawmakers didn't come up with the tax amnesty idea. The House swiped it from Gov. Bobby Jindal's failed tax rewrite plan and used it to replace some of the one-time, patchwork dollars proposed by the Republican governor to balance next year's budget.
A group of conservative House Republicans, nicknamed the "fiscal hawks," blame the use of piecemeal financing — like from legal settlements and property sales — as creating continued cycles of budget problems when the dollars fall away and must be replaced.
In a budget deal with House Democrats, the fiscal hawks agreed to the tax amnesty program even though it seemed like a short-term solution similar to the one-time money they derided. Lawmakers said it was more stable funding because the amnesty program would be spread over three years and would generate tax dollars already owed to the state.
Rather than seek to make cuts by removing the amnesty money, senators kept those dollars in the final budget compromise with the House, even though members of the Senate Finance Committee had questioned whether the $200 million would appear.
In a budget hearing, Sen. Greg Tarver, D-Shreveport, raised questions about tax amnesty.
"With your experiences, would you use the figure of $200 million to budget, or less?" Tarver asked Greg Albrecht, chief economist for the Legislative Fiscal Office.
"I actually wouldn't use a figure to budget at all, senator," Albrecht replied.
Tarver responded, "Are you just saying they pulled a figure from the air and utilized it?"
"I don't know where the figure came from," Albrecht answered.
Rep. Joel Robideaux, R-Lafayette, sponsor of the amnesty bill, said he looked at the state's experiences with a previous tax amnesty program passed in 2009, along with the outstanding tax debts that could be collected, to devise an estimate.
He said he took a conservative approach, noting the state is owed even more in delinquent taxes than when the last amnesty program took place and that the last program generated three times more than what had been forecast.
The way the amnesty program is crafted allows for three different amnesty periods over three years. Lawmakers should know if they hit the $200 million mark from the first amnesty period by December or January.
They wait with fingers crossed.
EDITOR'S NOTE: Melinda Deslatte covers the Louisiana Capitol for The Associated Press.