Louisiana could be cutting taxes – and reducing revenue – at the same time the state faces a half-billion dollar budget shortfall because of temporary taxes that are rolling off the books. This illogical dynamic stems from a 2021 law that requires automatic, across-the-board revenue cuts if certain economic and budget conditions are met. It’s still not certain if the state will hit all those benchmarks, though it appears likely it will. As the Louisiana Illuminator’s Julie O’Donoghue explains, the income-tax ‘trigger’ would make the state’s impending fiscal cliff much worse.
The income tax rate reductions, if mandated, would bring the state’s estimated financial shortfall from $587 million next year to as much as $787 million, according to the state revenue department. This larger deficit would make budget cuts to higher education, disability services and public school teacher pay more likely. State budget holes would also deepen for years to come. Starting July 1, 2026, the impact of the income tax reduction would be a loss of $200 million to $400 million in state revenue per year. It would bring the projected budget shortfall for fiscal year 2027-28 to more than $1 billion.
A tax-cut trigger would come at the worst possible time for the state’s finances, as next year’s fiscal cliff already threatens devastating cuts to health care, higher education and other vital programs and services.
“The responsible thing would be to cancel these triggers and deal with the fiscal cliff,” said Jan Moller with the left-leaning think tank Invest in Louisiana. Moller’s organization opposed the automatic triggers when they were put in place in 2021 because he believed they would result in arbitrary budget cuts. “We did speak out about this in 2021 for the exact reason of what we see happening today,” he said.
Millions of children lose health coverage
In the spring of 2023, states across the country began kicking people off their Medicaid rolls, a process sparked by the end of pandemic-era coverage protections. Since then, 5.5 million children have lost health coverage. Only a fraction of these kids have been able to enroll in the Children’s Health Insurance Program, with many deemed ineligible due to paperwork or bureaucratic issues. Axios’ Maya Goldman reports:
The Children’s Health Insurance Program was designed to keep kids insured when their family makes too much to qualify for Medicaid but still might have trouble affording private health insurance. The Urban Institute in 2022 estimated that 57% of kids losing Medicaid in state unwindings would be eligible for separate CHIP coverage. Instead, CHIP programs have netted up about 9% — or 450,000 — of the population of kids who fell off Medicaid rolls since states started resuming eligibility checks in the spring of 2023, according to a Georgetown University Center for Children and Families analysis of state and federal data shared with Axios.
Tuition increases for ‘high-cost’ programs
Undergraduate students in ‘high-cost’ programs could see their tuition increase because of a new state law. The state Board of Regents released a list of the affected programs on Wednesday, which includes business, engineering and honors programs. The Times-Picayune | Baton Rouge Advocate’s Marie Fazio reports:
Under a new state law, Louisiana higher education institutions can raise tuition and fees for any graduate and professional programs and undergraduate programs that cost more to operate because of small class sizes, expensive laboratory equipment, faculty salaries or accreditation requirements. … According to the law, boards can only increase tuition and mandatory fees by up to 10 percent over a two-year period and must give students notice of any upcoming increases and have opportunities for waivers in case of financial hardship.
The benefits of investing in community-led initiatives
A community-led initiative in two Baltimore neighborhoods has helped prepare more kids for kindergarten, improved education outcomes for K-12 students and dramatically reduced infant mortality rates. The Urban Institute explains why investments in the the Promise Heights initiative and others help families thrive:
To learn more about these programs, we spoke to [Lezley] Lewis and four community advocates and leaders working with B’more for Healthy Babies. We asked them, “Why are community-led initiatives crucial to helping children and families lead healthy, successful lives?” Their answers demonstrate why community-engaged and community-led initiatives work: residents tap into their community’s strengths and lead the changes they want to see. To help their neighborhood thrive, community leaders in Upton and Druid Heights are not just investing in young people but providing supports to all members of the community.
Number of the Day
14 million – Number of working adults who would benefit from a permanent expansion of the enhanced Earned Income Tax Credit that was included in the 2021 American Rescue Plan Act. (Source: Center on Budget and Policy Priorities)