Does offering amnesty to tax delinquents provide an alternative to shaky one-time revenues in next year’s state budget?
That seems to be the message from a key economist to state lawmakers who have been congratulating themselves on coming up with the amnesty idea.
The economist, Louisiana State University’s Jim Richardson, will have his first opportunity to publicly throw cold water on the lawmakers’ plan when the Revenue Estimating Conference meets Wednesday morning in the state Capitol.
Richardson’s views are particularly important because he is the only economist and politically independent member on the conference, an obscure but powerful four-member panel that must make all its decisions unanimously. The other members are: Senate President John Alario, R-Westwego; House Speaker Chuck Kleckley, R-Lake Charles; and Commissioner of Administration Kristy Nichols, representing Gov. Bobby Jindal.
Democrats and the group of conservative Republicans known as Fiscal Hawks crafted the tax amnesty plan late last week as a way to eliminate a portion of the one-time and contingent money that Jindal wants to use to balance the budget.
The Fiscal Hawks and Democrats settled on the amnesty plan after Jindal and his allies in the business community forced them to retreat from a proposal to trim business tax breaks as a way to generate needed revenue. The Fiscal Hawks and Democrats believe that balancing the budget on one-time and contingent money means counting on revenues that won’t materialize in full. Midyear cuts are the inevitable result, they say.
Fiscal Hawks and Democrats built the tax amnesty plan into the version of the state budget that they passed on Friday. They are projecting that the amnesty would raise $200 million for the coming year and $200 million more over the following 12 to 18 months, said state Rep. Joel Robideaux, R-Lafayette, who came up with the idea.
But Richardson said in an interview Tuesday that the tax amnesty plan is one-time money. By that, he means it is money that cannot be counted on to flow into the treasury year after year and shouldn’t be used to pay bills the state faces year after year.
“It’s a risky number to put into the budget,” Richardson said. “It’s always been non-recurring.”
Kleckley in an interview Tuesday noted that past amnesty plans have lasted less than a year while this one would last 24-30 months and thus meets the Legislature’s legal definition of annual or recurring revenue.
“This is real money due to the Department of Revenue,” Kleckley said. “It’s not the sale of a building or the sale of property,” which is the “contingent” money that Jindal had in his budget.
Kleckley and three Fiscal Hawks – Robideaux, state Rep. Brett Geymann, R-Lake Charles, and state Rep. Lance Harris, R-Alexandria – presented their plan Tuesday morning to Alario and a select group of senators in the Senate president’s office. The Senate Finance Committee will take up the budget on Thursday.
In an interview after the presentation, Alario seemed to accept their thinking on the amnesty plan.
“I think it could fall into the category of recurring,” he said. “We’ll see if we can convince Dr. Richardson.”
Does Alario’s argument change Richardson’s thinking?
“It does not,” Richardson said.
The Revenue Estimating Conference will not make a decision Wednesday on whether the tax amnesty money counts as recurring revenue. It will make that decision only if the amnesty plan is incorporated into a budget approved by the House. The budget would still need approval by the Senate and then by Jindal to become law.
But the amnesty is a hot topic because it is the most controversial part of the budget plan. An analysis by the Legislative Fiscal Office says a main effect of the amnesty is accelerating the collection of money that the state would receive in later years.
Amnesty aside, the estimating conference’s main task Wednesday will be to determine how much extra revenue the state treasury has collected, money that policy-makers can use for the fiscal year that expires on June 30 and for the upcoming year that begins on July 1.
The House budget is counting on $90 million more for next year than the last projection. Richardson said he believes the available amount ranges from $50 million to $125 million, mostly from higher-than-expected income tax revenue.
Two state government economists, Greg Albrecht from the Legislative Fiscal Office and Manfred Dix from the Division of Administration, will present their analysis to the estimating conference. The four members will then have to choose which figures can be used.