Government & Politics

Letter portends debate over how to spend money raised by tax amnesty program

Last week, state Rep. Joel Robideaux explained to his colleagues how legislators in 2010 pulled an end-run on rules limiting how they could spend $482 million raised by a one-year tax amnesty program. They did it, he explained, by shifting most of the money through different state spending accounts until it was available for salaries, supplies and other ongoing expenses.

Robideaux, R-Lafayette, said Monday that he wrote the letter because state lawmakers might be faced with a similar predicament if this year’s tax amnesty program raises more than the budgeted $200 million. “Now everyone’s on alert about what’s been done in the past,” he said.

But several fiscal watchdogs question Robideaux’s intentions. They believe he laid out what happened in 2010 as a blueprint for evading the state Constitution restrictions on how one-time money can be spent.

Said Steve Winham, who was the state budget director from 1988-2000: “He’s saying, ‘We’ve figured out how to do whatever we wanted to do with the money. Here’s our roadmap to spend it however we want to.’”

A headline on a news story Monday by LaPolitics captured this belief: “How Lawmakers Might Launder the State’s Amnesty Money.”

Robideaux’s tax amnesty program is active for one or two months per year for three years. It was budgeted to raise $200 million during the current fiscal year.

How to count the money collected this year — whether it’s considered a one-time revenue source or it’s available for ongoing expenses — is at the heart of the debate over his letter. The issue will be addressed soon by an obscure but powerful state entity known as the Revenue Estimating Conference.

Robideaux, an accountant, holds an influential position as chair of the House Ways and Means Committee, which handles tax policy.

He reluctantly pushed the tax amnesty program late in the 2013 legislative session as a way to balance the state budget.

Robideaux said then that the $200 million projected to come from the program this year would allow legislators to avoid raising money by ending some business tax breaks, which Gov. Bobby Jindal would not support, or cutting in spending for health care and higher education.

His measure, House Bill 456, allows delinquent taxpayers and taxpayers who have challenged their tax bills to settle with the Revenue Department and save on penalties and interest.

Legislators loved the measure – it was approved unanimously in both the House and the Senate – because it raised additional money without raising taxes. That support extended across parties, including Democrats and conservative Republicans known as the Fiscal Hawks, who have made a name by opposing Jindal’s budget gimmicks.

When he sponsored the bill, Robideaux argued that the $200 million in tax amnesty revenue could be counted as an ongoing revenue source — “recurring” in legislative parlance — and thus be plugged into the state’s operating budget to pay for annual expenses. Non-recurring money can be spent only on one-time items such as salary bonuses, on paying down the state’s pension fund deficit or on padding the state rainy day fund.

An analysis by the Legislative Fiscal Office said that because Robideaux’s bill extends the tax amnesty for three years – compared to a single year for a tax amnesty offered in 2009 — the tax collections might qualify as recurring revenue.  Robideaux needed a three-year program to get around the state’s definition of “non-recurring revenue,” which applies to revenue sources that last no longer than two years.

Extending the program to three years did not sway a key economist, Jim Richardson, who is at Louisiana State University. In an interview in May before Robideaux’s bill was approved, Richardson said the tax amnesty money should be counted as non-recurring.

Richardson’s views carry special weight because he is one of the four members of the Revenue Estimating Conference, and the only independent member. The Revenue Estimating Conference plays a crucial role because it certifies how much revenue the state has collected and thus can spend. The conference has never deemed tax amnesty collections as recurring, Richardson said.

In last week’s letter, Robideaux explained that lawmakers in 2010 faced a problem because the Revenue Estimating Conference did not deem any of the $482 million collected in the previous year’s tax amnesty to be recurring.

This meant that lawmakers and Jindal could not use any of the $482 million to meet the state’s ongoing expenses. As a result, legislators would have to cut that much in spending or raise taxes to patch the budget.

But state legislators, as Robideaux explained, were able to bring the money into the state budget through what others have called accounting tricks. The Legislature transferred most of the $482 million to one state account and then another and finally routed it to accounts where – presto! — it could be spent just like recurring revenue. The money was spent on the state’s hospitals, the tax collection agency and colleges and universities.

In an interview Monday, Robideaux said he wrote the letter to inform his colleagues of how the Legislature next year might resort to the same budget practice as in 2010 if the tax amnesty produces more than the projected $200 million, and if some legislators want to use the extra money to balance the budget rather than set it aside as the Constitution requires.

Robideaux said Fiscal Hawks have expressed their appreciation for describing what happened in 2010. “The Hawks were not aware of what was done,” he said.

Indeed, the leader of the Fiscal Hawks, state Rep. Brett Geymann, R-Lake Charles, applauded Robideaux for the letter. “I take it as educational so we don’t do that,” Geymann said in an interview. “I don’t want to use any of the extra money improperly.”

Robideaux, who also counts himself as a Fiscal Hawk, agreed. “If the money is non-recurring, it should be spent on non-recurring items,” he said.

The tax amnesty program has faced other questions.

Robert Travis Scott, president of the Public Affairs Research Council, a Baton Rouge-based think tank, is among the analysts who believe that the Robideaux tax amnesty is bad public policy. Because studies show that most of the money would have been collected in later years, he said, “You’re just borrowing from yourself.”

In a recent column in Governing magazine, contributing editor Alan Ehrenhalt called a tax amnesty “a short-term solution with long-term problems” and dubbed Louisiana “the tax amnesty capital of the United States.”

In an interview last week, Richardson said the Revenue Estimating Conference’s next meeting would occur no later than January. If the four members rule that the tax amnesty money is non-recurring, that could force Jindal to make unpopular midyear cuts. He has had to do so during each of his first five years in office.

Or legislators could carry out similar a similar gimmick as Robideaux outlined, although he said the rise of the Fiscal Hawks makes that less likely. The 2010 end-run came at the behest of the freer-spending Senate.

C.B. Forgotston, an attorney in Hammond and a former legislative budget committee staffer and business lobbyist, condemned what lawmakers did in 2010. He fears legislators will do it again.

“It’s not surprising that they circumvent the Constitution,” Forgotston said. “It is a surprise that Robideaux lays out the scheme so clearly. It’s a slap in the face of the citizens in this state who believes that our Constitution should be adhered to.”

Robideaux’s letter

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