I’ve called you back here – even though it might feel like you’ve never left – because we’ve got unfinished business to tend to. That unfinished business is the difference between whether TOPS is fully funded, whether hospitals in the districts you represent remain open to serve your constituents, and whether we’re going to stabilize our great state and put this budget crisis behind us once and for all.
We’ve been through a lot together since being sworn into office a little less than six months ago. Since January, we’ve faced three natural emergencies. We’ve eliminated a $940 million budget deficit for this fiscal year and whittled down the coming year’s deficit from more than $2 billion to $600 million. We’ve cut spending to the tune of $230 million in the current fiscal year alone, implemented a statewide hiring freeze, and underwent an unprecedented review of government contracts – all in an effort to operate government more efficiently and save taxpayer dollars. And we’ve begun the process of bringing our federal tax dollars back to Louisiana through Medicaid expansion, which will save more than $180 million for our state in the first year alone.
But while we all may be getting weary of what is beginning to feel like a never-ending legislative process, there is still more important work left to do. The people who sent us here expect us to finish the job. If we don’t address this $600 million deficit, we force critical state services to remain unfunded next year.
We still have a real mess on our hands, and the longer we put off cleaning up that mess, the more damage we do and the more problems we create for ourselves down the line.
And don’t forget, the $600 million represents the amount needed for a truly stand still budget – the ability of the state to provide the same level of services without accounting for inflation, and merit raises for state employees, among other things.
However, we have something right now that we didn’t have at the start of the first special session – a budget plan for next year. If we can all agree on one thing, it’s that we don’t like that budget. I don’t, and you don’t.
Because it is so ugly, I came down to the legislature to present it myself.
- $75 million short for K-12 education
- $54 million cut from higher education
- TOPS is $155 million short
- $174 million cut from critical, life-saving health care services – our public-private partnerships, waivers, and essential Medicaid services
And while it is not the budget that you or I want implemented, it is one of the most honest, disciplined budgets we’ve seen in a very long time. It contains no one-time funds, no fund sweeps, and it keeps the transportation trust fund whole by ensuring that the gas tax goes to its intended purpose – our infrastructure needs – roads, bridges, and ports – while doubling the investment in the port priority programing, honoring our commitments to our veterans with no cuts to the State Department of Veterans Affairs, and ensuring the National Guard is fully funded and ready to respond as needed.
Because it is time – past time – to honestly and responsibly budget, we simply cannot and will not ignore the costs the previous administration pushed into this year. For instance, for the first time in our state’s history – since the Medicaid program was formed – my predecessor failed to budget for any Medicaid utilization increase. They ignored it. To make matters worse, they only made 11 of their 12 vendor payments, leaving next year’s budget with 2 utilization increases and 13, rather than 11 vendor payments. These are the kinds of tricks and gimmicks that have made our budget crisis even worse. The days of kicking the can down the road are over. The day is reckoning is at hand.
That’s why I’ve called you back into another Special Session now. The need is urgent. There is no time for delay. Our students can’t wait. Our hospitals can’t wait. Our disabled citizens can’t wait. Our universities and community and technical colleges can’t wait. K-12 schools can’t wait. And simply put – Louisiana can’t afford to wait. We must fix our problems now.
The good news is that the people of Louisiana know we are in a fiscal crisis and they expect – actually they demand – that we make the hard decisions necessary to fix it.
So for the next two and a half weeks, we need to be focused on two main goals.
Well, I wrote that line before yesterday. A third main goal will be to pass a capital outlay bill that allows us to complete essential construction projects, tackle deferred maintenance, and invest in our highway priority program and other critical infrastructure needs.
Another goal is to clean up work from the first special session. The penny sales tax cannot and should not have ended up on school lunches, Girl Scout cookies, or many other items. The frantic pace of the final moments of the previous special session led to some unintended consequences that we need to fix. Therefore, a great deal of my call is focused on removing taxes.
Second, we must enact real, meaningful tax reform and close the $600 million deficit remaining for the fiscal year beginning July 1. That’s less than a month away, if you needed any more sense of urgency.
In order to do this, the task force you and I created has provided a framework for us to get the job done right. My proposals for this session are fully consistent with that framework. These aren’t the recommendations of a Republican task force or a Democratic task force; this is what a group of bipartisan economists and business leaders are telling us we need to do if we want Louisiana to prosper again.
Some of the items in the call should be no brainers.
One item, an increase on certain health insurance premiums taxes, has already passed the legislature during the first special session with a two-thirds vote. Unfortunately, CMS did not approve our plan. But we are confident that the version of the bill for this session will gain CMS approval because the increase will be more broad based, and we will actually be reducing it from the 6 percent levied in the first special session to 5.5 percent.
We must reduce the lavish tax giveaways enjoyed for too long by too many businesses without regard for their poor return on investment and their negative impact on the state budget. This spending must be cut so the revenue can be redirected to more critical priorities.
I’m also asking you to reduce the excess itemized deductions on individual income taxes. This proposal would bring our deduction to 57.5 percent – what it was before we even implemented the Stelly Plan. But, the best part about this proposal is that it will not impact 74 percent of the individuals in our state; and at 57.5 percent it fully protects charitable donation and mortgage interest deductions.
There are other proposals as well, including bracket compression and single sales apportionment on corporate income and franchise taxes.
Many of these proposals have been discussed in Louisiana for years; the only difference is that we don’t have the option of waiting any longer.
We have the opportunity – right now – by working together to fully fund TOPS, to keep our hospitals open, to fund K-12 education, to avoid the 8th straight general fund cut to higher education – already the biggest disinvestment in the nation over the last eight years - and to get ahead of the game on reforms we already know we need. In short, we have the opportunity, and I believe the obligation, to stabilize the state and finally put an end to this fiscal crisis.
These changes will be a down payment on long-term, comprehensive tax reform that we will tackle in April 2017.
You’ve heard me say this before, but we need - no, we have to - make the harder right choices in the next two weeks, rather than the easier wrong ones that could have negative long-term effects on our state.
The days of patching our budget together through duct-tape solutions, maxed out credit cards and misguided fund sweeps is over. It’s time to turn the page to long term budget stability.
I'm not just asking you to get the job done: I'm asking you to get the job done right and to do it right now. The people of Louisiana are demanding this.
Nobody likes the diagnosis of our fiscal crisis, and nobody likes the prescription, but we have to take our medicine.
I know there hasn’t been much of an appetite around here for additional revenue. Look, it’s a hard pill for me to swallow, too. Contrary to what some folks might say, I do not want to raise taxes. Let me say that one more time for anyone in this room who didn’t hear me – raising taxes isn’t something I’m happy about nor is it something I take lightly. But just as we’ve made significant cuts in spending, we also need to focus our attention on restructuring the state’s tax code.
Credit agencies have seen through the illusions of the past and downgraded our credit twice this year – once after the first special session because of the temporary nature of the changes and because they only partially addressed the problem. And, they have threatened to do it again if we don’t get our act together.
It took eight years to create this crisis, and I know the damage cannot be fully repaired in one, two or even three sessions, but we can’t ignore our problems like we have in the past.
More importantly, the people of Louisiana shouldn’t have to be here year after year pleading for quality, affordable education or begging that life-saving waivers and critical Medicaid services are preserved.
Let’s always remember that we work for the people of Louisiana. They honored us with the opportunity to serve. Let’s live up to their expectations and get our act together. We all know what needs to be done. We simply have to look within ourselves and find the political courage to get it done.
For those of you who think this special session isn’t necessary, or that delaying it well into the fall is an option, I’d ask you to consider how this “wait and see approach” has worked in the past. I cannot imagine a more irresponsible plan.
As I’ve said, credit rating agencies are watching us. Our public-private partnerships are in jeopardy. School starts in August. We have the revenue estimating conference for a reason. They aren’t fortune tellers, but they give us the best outlook possible. Sometimes, as was the case last year, they over-estimated the amount of revenue we would collect. There’s no reason to believe that can’t happen again.
But, we can’t be in the business of wishing and hoping that additional funds are available, only to find out down the road that they aren’t. Annual mid-year cuts destabilize our critical institutions and punish our people too.
The pots of one-time money we’re accustomed to finding by this point are gone. The previous administration robbed Peter to pay Paul, drastically reducing our cash reserve funds from more than $9 billion to $5 billion, including raiding and depleting the Medicaid Trust Fund for the Elderly and many other funds as well.
But even if a large amount of one-time money were available to us, I would reject that approach. The Legislative Auditor’s report this year showed that Louisiana has faced deficits annually averaging $1.2 billion for the last five years. The report cited the repeated use of borrowed money and non-recurring revenue as reasons for increased deficits and credit rating downgrades.
In fact, more than $800 million in one-time money is in the current year’s budget and lined up against recurring expenditures.
That’s not the only problem – our state faces an even bigger problem – our cash flow. The irresponsible budget practices of the previous administration drained virtually every dollar held in funds which the state has used to insure adequate cash flow as revenue arrives during the year. Our fiscal advisors are now telling us to brace for a cash flow problem, even if we raise the dollars necessary to appropriately fund our critical priorities. Because most of our state’s revenue comes in the second part of the year, yet our expenses are spread out evenly throughout the year, our ability to borrow from other funds within state government, known as interfund borrowing, is severely limited.
Let me put this into perspective. In 2010, we had $4.8 billion at the end of the fiscal year to cover $285 million in expenses. Today, we only have $2.5 billion available to cover $1.7 billion in expenses. That, in itself, is a very serious problem.
Simply put - the tricks and gimmicks won’t work anymore. I will not govern in that fashion and I urge you to work with me to restore fiscal sanity and responsibility to our state budget.
It’s time for us to put a budget plan in place that is worthy of the people of this state – all of the people of our great state. And so, I believe we must reasonably do what we can for the least among us. Our basic obligation in this regard is not waived when it is harder or more inconvenient. While it is certainly a challenge, ultimately we choose whether we will be sheep at the right hand or goats at the left.
I know we won’t always agree, and I respect that. I sat where you are sitting right now, and listened to a governor make empty promises and pretend all is good. I will not do that.
In addition, I have spent countless hours meeting with you, listening to your ideas and concerns, expressing my own and debating solutions so that together, we can choose a path forward that puts people over politics - that puts Louisiana first.
Your constructive ideas, your involvement, your input will be considered. Constructive is the key. Too many people are taking their cues from Washington, and too many people have already spent enough time there to learn the art of distraction.
Now is the time to govern – not to engage in self-serving, hyper-partisan grandstanding that is largely responsible for the mess to begin with.
Let’s work together.
I hope, by this point, you know that my door is always open - whether you’re a Republican, a Democrat, or an Independent. Compromise is not a dirty word, and I am very hopeful that we can work together to address these challenges, not just in this special session, but in the months and years ahead.
It’s time to get this crisis behind us so that Louisiana can thrive, not merely survive.
The breeze of hope we felt on January 11 is still alive. I feel it. The people of Louisiana feel it. Let’s harness that momentum and discover the bright future that awaits us. Our best days are ahead, but only if we make our best effort now to fix our problems.
I believe in the awesome power of prayer. So, I am, once again, asking the people of Louisiana to pray for everyone in this room – all of you and me – as we begin this work, and I will do the same for all of you.
God Bless You. God Bless America. And God Bless the Great State of Louisiana.
Let’s get to work.