Finding a Path Off the Fiscal Cliff

Feb 5, 2015

Finding the way down off the fiscal cliff could be as simple as turning around, and looking back at the path that brought us here.

“The root of our current budget problems goes back to the decision in 2008, under Gov. Jindal, to repeal the Stelly tax changes that voters passed in 2002,” says Louisiana Budget Project director Jan Moller. “That has taken about six to seven hundred million dollars our of our tax base every year.”

Moller says legislators need to revisit those higher income tax brackets.

“The economy has grown. Incomes have grown at the top of the income pyramid. And I think we need to talk about how they can pay a larger share,” Moller states, unequivocally.

The decline in oil revenues has also enlarged the projected deficit for the upcoming fiscal year. Moller says that could be partially alleviated by repealing the state’s two-year immunity from severance taxes, given to fracking operations.

“This tax break was originally passed more than 20 years ago, when horizontal drilling was an experimental technology,” Moller notes.

It’s no longer experimental As Legislative Fiscal Analyst Greg Albrecht puts it — “We’re not ever going to forget how to get oil out of shale now.”

In addition, there’s a large pot of federal money available through Medicaid expansion under the Affordable Care Act. Moller says it would help many of the currently uninsured:

“That’s more than a quarter-million people in Louisiana.”

And it would help the state’s budget woes.

“This would be 100 percent funded by the federal government, which would free up the money we’re spending right now on uncompensated care,” Moller explains. That 100 percent funding is good through 2016. After that, the state just pays 10 percent of the expanded Medicaid costs.

This combination of solutions would cover the expected deficit, using recurring revenue to achieve a balanced 2016 budget. The major problem with implementing any of these solutions is Governor Jindal. Because of signing a Grover Norquist-prompted pledge not to increase taxes—and because of Jindal’s national ambitions—he steadfastly objects to anything that could be branded a tax hike. The governor also refuses to consider Medicaid expansion under Obamacare.

Tomorrow, we’ll look at more options — possibly more palatable — for getting down off the fiscal cliff.