governorslegislativepackagestalls

By MICHELLE MILLHOLLON AND MARK BALLARD
Advocate Capitol News Bureau
Published: Dec 11, 2006

Gov. Kathleen Blanco’s legislative package stalled Sunday, sending her administration into a scramble to salvage the special session. Instead of advancing bills, the full House adjourned to allow Democrats, Republicans and black lawmakers to huddle privately with their caucuses.

Representatives from both parties say Blanco may have to scale back her ambitious $2 billion plan to two items: $300 million for a German steel mill and a $238 million reimbursement of a hurricane-related insurance surcharge.

Conceding that the votes to forward her full package were not there, the Blanco administration pushed an alternative method for reimbursing homeowners and businesses for the assessments they paid to bail out a state-backed insurance agency. With the alternative in place, the closed-door negotiations began.

“Hopefully, we’ll have a meeting of the minds to see if we can accomplish something,” said House Speaker Joe Salter, D-Florien, as he went to one meeting. But Republican and Democratic leaders said later Sunday night that no compromise was reached.House Republican leader Jim Tucker of Terrytown said the GOP members want to focus on tax breaks while the Democrats want to push pay raises and other spending.

Democrat caucus leader Rep. Eric LaFleur of Ville Platte said the Republicans won’t budge and could rupture the state’s efforts to woo ThyssenKrupp Steel AG to locate a plant in St. James Parish.

The sticking point is the amount of money the governor wants to spend — about $2 billion on tax breaks, pay raises, the steel mill and insurance rebates.

To pay for the package, legislators would have to raise state government’s spending cap. The state constitution imposes a ceiling — called an expenditure limit — on how much legislators can spend.

A formula determines the limit, which fluctuates. For the special session, legislators can only spend $194 million before reaching the limit. Legislators can raise the limit, but only with a two-thirds’ vote of the House and Senate.

In the 105-member House, the Blanco administration needs 70 votes to raise the ceiling. Republicans hold 41 seats.
Salter, who is one of Blanco’s hand-picked leaders, said the votes weren’t there Sunday.

Salter said there does seem to be consensus for setting aside money to lure the steel mill and for reimbursing homeowners and businesses in the Louisiana Citizens Property Insurance Corp bailout. The problem is the cost of the projects exceeds $194 million.

At the end of the evening, the Democrats proposed increasing the spending cap to $300 million to put aside for the steel mill. LaFleur said Republicans are balking at the modest increase.

“They have indicated to us that they are against breaking the cap even if it means jeopardizing this project,” he said.

Coming out of a meeting of the Black Caucus, which he chairs, Rep. Cedric Richmond, D-New Orleans, said, “It’s a fluid process. We’re still looking for achieving everything that is on the call.”

Hurricane recovery is generating a tax revenue boom, creating a $2.4 billion state government windfall. Blanco believes the recovery will continue to enrich the state for several years, making it reasonable to commit to recurring expenses such as pay raises.

Republican leader Tucker — and other fiscal conservatives — disagree, arguing that the state is experiencing a false economy. “This is a watershed issue difference between Republican philosophy and Democratic philosophy in that we feel very strongly that we can live within our means,” he said.

State government can afford the $300 million for the steel mill without busting the spending limit, Tucker said. Also on the line are raises for teachers, law enforcement, firefighters, state workers and others.

The Blanco administration scrambled to save parts of her package before they were derailed by opponents of the spending cap.

In slightly more than six minutes the House Ways and Means committee approved House Bill 120, which would allow taxpayers to write off the insurance surcharge on their state income taxes. Another measure that would have reimbursed policyholders by checks mailed in February was approved by another committee Saturday.

But sending refund checks would take about $238 million right out of state government’s wallet. A tax write-off would reduce the amount of money state government could collect in taxes. As a tax credit is not an expense, it can be imposed without impacting the spending cap.

“Our goal is to get the money back to the people who paid it,” said Kimberly Lewis Robinson, Blanco’s special counsel who is in charge of shepherding the governor’s tax cut bills through the legislative procedure.

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