Lawmakers Temporarily Avoid Triggering Higher Business Taxes
BATON ROUGE – Louisiana officials on Friday temporarily avoided triggering the business tax increases and worker benefit cuts that could be needed to replenish the state’s shrinking unemployment insurance trust fund, though no one has yet proposed a permanent solution.
State law requires the Revenue Estimating Conference before Oct. 1 to project how much money will be available next year in the fund. That number determines how much businesses will be taxed to support the fund, how much unemployed workers will receive, and whether a worker training program will operate.
State House Speaker Clay Schexnayder and Senate President Page Cortez, two of the REC’s four members, declined to adopt an estimate at Friday’s meeting, buying a few more days to discuss other options when the Legislature convenes its special session Monday. Another REC meeting is scheduled for Tuesday.
Record demand during the business restrictions imposed in an attempt to slow the COVID-19 pandemic has caused the fund to dwindle from more than $1 billion to less than $50 million. Officials expect the fund to be tapped out by Oct. 5.
The Louisiana Workforce Commission will borrow money from the federal government to pay legally required benefits through the end of the year. The money initially will be interest-free but must be paid back.
The higher costs for businesses could come on two fronts. The amount of employee wages that are taxed, and the tax rate, rise when the projected balance falls. And when the fund balance falls below $100 million, employers by law must pay an additional “solvency tax.”
Edwards on Friday said he was amending his current COVID-19 emergency order to suspend the solvency tax statute, effectively pushing back when employers would have to start paying the tax from April to July. The hope is that the state’s economy would be further on the road to recovery by then.
But Cortez questioned whether Edwards has the authority to suspend the law.
“In effect, this executive order is asking you not to follow the law,” he told Ava Dejoie, who heads the Louisiana Workforce Commission.
Cortez considers figuring out a way to avoid putting new costs on businesses, many of which are struggling, the top priority for the 30-day special session that begins next week. Options could include using surplus dollars from a prior fiscal year or borrowing money through a bond issue to replenish the unemployment fund.
Also at Friday’s REC meeting, members discussed state government’s overall fiscal picture. Though the final tally is not yet available, the state may have run a surplus of around $200 million during the fiscal year that ended June 30, but not because the economy grew, legislative economist Greg Albrecht said.
Tax and fee collections were down compared to the previous year but still overshot the conservative projections the REC adopted amid the COVID-19-related economic uncertainty. For example, casinos were shut down in March as part of the effort to control the spread of the new coronavirus.
The state economists, unaware of when the facilities would reopen, included no casino revenue in their projections for April, May and June. However, casinos were allowed to reopen with capacity limitations, and the unanticipated revenue accounts for more than half of the difference between projections and collections, Albrecht said.
He also noted with surprise that alcohol taxes are up even though bars have been closed for much of the pandemic. Apparently, people have been drinking more at home, he surmised.
By David Jacobs of the Center Square