Second Special Session Outcome



Second Special Session Outcome

 

So how did we get here? Pick your cliche' - Groundhog Day, Déjà vu All over Again or simply Trainwreck, they all fit. For the third June in a row, we find ourselves unfortunately witnessing an unprecedented level of discord and dysfunction in our legislative process, with the focal point of this activity residing in the House of Representatives. Conversely, the Senate passed multiple pieces of legislation on a broad bipartisan basis. As a result, we have now completed the sixth special session and are looking at the likelihood before the end of this month.
 
For the second year in a row, the House of Representatives has failed to pass key fiscal legislation in the regular session. This year, while a budget was passed in the regular session and again in the Special Session, the House of Representatives could not pass sufficient revenues to replace half of the expiring revenues that were passed back in 2016 to allow time for fiscal reform. Instead, the Legislature passed a budget with what are referenced as "above the line and below the line" expenditures that will be funded based on whatever revenue was passed. As things currently stand, the revenues are more than $500 Million less than what is required to fund necessary state services. Unless revenue is raised to meet this need, a host of cuts will be made to fundamental services.
 
Of note, the combined cut to Higher Education and TOPS is approximately $190,000,000; cuts to Law Enforcement (which includes District Attorneys, Sheriffs, and Correctional facilities and staffing thereof) is approximately $114,000,000; with cuts to all agencies that receive state general fund revenues at 24%. However, these are only the most numerically significant cuts, there are multiple other cuts to agencies that will severely impact the ability to provide services.
 
To the extent there is any positive news from this Session is that healthcare, including the medical schools, were spared any budget cuts. As a result, the substantial negative impacts from the types of cuts that would have led to the negative ripple effects are avoided for now.

Although the call for this session provided for 32 separate areas of legislation, with 29 clearly focusing on expenditures and revenues, ultimately the only substantial revenue measure that was passed from the House to the Senate was a single sales tax measure (HB 27) that would have retained 1/3 of the 1 "clean penny" that expires on June 30. No income tax legislation made it out of House Ways and Means Committee. The only other revenue measure that came into play through a procedural move in the Senate was another sales tax bill (HB 12) that retained ½ of the 1 "clean penny" that expires on June 30. The difference between these two bills is best reflected as .17 on a $100 purchase or approximately $48.00 annually to a household earning $100,000/year. Under current law in place for the past two years, this tax was $1.00 on a $100 purchase.
 
Going into the Session, the identified revenue need was $640 Million, which reflected both the impact of federal tax cuts (which reduces the amount of the federal deduction from state income taxes and thereby increases the amount of revenue payable to the state by operation of law), and across the board cuts to all state agencies as part of the budgeting process. It also included $260 Million of new obligations that resulted from Legislative action in 2017, federal mandates, court orders and judgements, amongst other items.
 
This last bill, HB 12 by Rep. Leger received its first and only consideration by the House of Representatives after 11:30 p.m. on Monday when it was apparent that HB 27 by Rep. Lance Harris appeared to not be coming to a floor for a vote on the conference committee report. However, once Rep. Leger's bill (HB 12) fell short by seven votes, Rep. Harris brought his bill (HB 27) to the floor for a vote; however, it received only thirty eight votes. When the House voted to reconsider Rep. Leger's bill a second time, Rep. Alan Seabaugh was allowed to filibuster until midnight to prevent a vote from occurring on the actual bill. The House adjourned abruptly and dispersed prior to the required receipt of notifications to and from the Governor and the Senate.
 
Although the Session lasted fifteen calendar days, the last thirty minutes of the Session is the best indicator of the current state of our legislative process. The net result of this Session is that a budget that cuts approximately 1/6th of the "discretionary" spending is now sitting on the Governor's desk. If revenues are not raised in another special session, then these cuts will be implemented starting July 1, 2018.

The items that will be cut are comprised of additional budget cuts and legislative mandates for services, payments or pay increases that are not funded by revenue that has been identified by the process that has been in place for predicting this revenue for the last three decades. The other cuts are and additional 24% across the board cut to all agencies to the extent they can withstand a cut. To make up for those agencies that cannot, the Administration has allocated additional cuts to the Governor's Office, the Division of Administration, the Department of Revenue and the Attorney General.

To avoid these cuts, support will be necessary for legislation that retains at least .5 of the expiring tax. Alternatively, if there is no will to support this revenue, then these cuts will occur starting July 1, 2018
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