Lawmakers consider new spending limit while they flip the state’s tax revenue model
State lawmakers advanced key legislation Monday connected to Gov. Jeff Landry’s proposed tax overhaul. While most of the package would free up funding currently locked into the Louisiana Constitution, another part seems to do the opposite by establishing a new spending limit.
House Bill 14, sponsored by Rep. Brett Geymann, R-Lake Charles, is a proposed constitutional amendment that would establish a “government growth limit,” a new kind of spending restriction.
The bill would require the Louisiana Legislature to calculate a limit on how much money can be spent on recurring expenses each year — those that continue each year in approximately the same amounts, such as healthcare, teacher pay and state police salaries.
The Louisiana Constitution currently has a separate expenditure provision that requires lawmakers to establish a spending cap each year. They sometimes raise the cap for certain reasons and situations, such as when the state takes in better-than-expected tax revenues.
Flush with cash last year, lawmakers voted to raise the spending cap by $1.65 billion to pay for transportation projects (more than $666.2 million), hospitals ($311.3 million), deferred maintenance on college campuses ($25 million), a popular roof fortification program ($40 million) and water and sewage system upgrades ($80 million), among other items.
They also spent $137.4 million on a variety of pet projects for a small inner circle of individual legislators.
Still, they were careful to not use the money on new recurring expenditures.
In an interview in the House chamber, Geymann said his proposal would add a new restriction in situations when state revenues have grown by a certain percentage, allowing lawmakers to only spend the extra cash on one-time, non-recurring expenditures.
“It’s not preventing us from spending it,” Geymann said. “It’s just preventing us from spending it on anything that recurs.”
On Monday, after the bill had cleared House committee hurdles last week, lawmakers folded it into an enormous piece of legislation driving much of the governor’s tax overhaul: House Bill 7, sponsored by Rep. Julie Emerson, R-Carencro.
Emerson’s bill calls for a rewrite of Article VII of the Louisiana Constitution, which deals mostly with taxation and spending. But unlike Geymann’s proposal, much of Emerson’s bill is aimed at removing spending restrictions from the constitution and giving the Legislature more flexibility to manage state tax revenues.
Article VII is a frequent target of constitutional amendments because it contains a variety of provisions that lock up state funding into different accounts dedicated for specific purposes.
Those kinds of provisions can protect funding for things like education, but some have also hindered the state from accessing cash in situations when it can best be spent, such as paying down debt in times of high interest rates.
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About 80% of all the amendments adopted since the passage of the 1974 Louisiana Constitution have been on Article VII, according to Steven Procopio of the Public Affairs Research Council of Louisiana, a nonpartisan think tank that analyzes government fiscal policy and constitutional amendments.
“Article VII is almost as long as the original 1974 constitution at this point,” Procopio said Monday at a House Appropriations Committee hearing. “It is the problem child of the constitution.”
Emerson’s 139-page bill would, among other things, permanently close a restricted account called the revenue stabilization fund, giving its money to local governments that eliminate taxes on business inventory and merging some into a different savings account.
It would also double the standard individual income tax deduction for seniors, exempt prescription drugs from state sales taxes, make it harder to adopt tax breaks, and use money from three educational trust funds to pay off teacher retirement debt — a move that would free up money for permanent teacher pay raises.
It would also remove a number of property tax exemptions from the constitution and place them into statute. That would allow lawmakers to repeal them with a two-thirds vote rather than having to seek voter approval with constitutional amendments.
The changes are all a part of the governor’s proposal to offer residents a lower flat tax on income in exchange for new and expanded sales taxes on digital goods and 40 types of services such as car washes, rideshares, fitness training, lawn care, and others. Landry has called lawmakers into a November special session to approve the sweeping legislative package that would accomplish his goal.
In a brief interview Monday, Emerson acknowledged Geymann’s proposed government growth limit would add a fiscal restriction to the constitution while other parts of her bill would remove similar but separate restrictions.
“Sometimes our hands need to be tied in certain areas and not in others,” she said.
Other lawmakers, including Rep. Matt Willard, D-New Orleans, are not keen on the idea of tying up revenues again.
“I don’t see why we would ever want to put that in the constitution and complicate that process,” Willard said in a phone interview. “I think it’s certainly going to tie our hands and the hands of future legislators.”
The proposal would not restrict funding for natural disasters and other emergencies.
House Bill 7 is expected to receive full passage Tuesday in a House floor vote, after which it will head to the Senate for consideration. Like all constitutional amendments, it needs a two-thirds vote in each chamber, and will then be placed on a ballot for voter approval in March.