State Rundown 5/31: Budget Woes Spurring Special Legislative Sessions

This week, special legislative sessions featuring tax and budget debates are underway or in the works in Kentucky, Minnesota, New Mexico, and West Virginia, as lawmakers are also running up against regular session deadlines in Illinois, Kansas, and Oklahoma. Meanwhile, a legislative study in Wyoming and an independent analysis in New Jersey are both calling for tax increases to overcome budget shortfalls.

— Meg Wiehe, ITEP Deputy Director, @megwiehe

• The West Virginia Legislature has adjourned its special session until June 5. In the meantime, Gov. Jim Justice is attempting to mediate the differences between the House and Senate tax plans, which have resulted in a stalemate.
• Kansas lawmakers are making progress toward passing additional funding for public education, but as of late last night have rejected another attempt at significant tax reform. Lacking support from lawmakers in key leadership positions has proved a major obstacle to addressing the state’s roughly $900 million budget hole.
• Kentucky‘s Gov. Matt Bevin announced last week that there is a “100% chance” of a special session this year to tackle “modernizing” the tax code and making “fundamental changes” to the state’s pension system. However, legislative leaders in the state have expressed concern that there is not enough time remaining in 2017 to sell a plan to the legislature or the public.
• North Carolina’s House members unveiled their version of a new budget this week on the heels of the Senate passing a budget bill earlier in the month. While there are many differences in spending priorities, both plans would embrace more tax cuts on top of changes in 2013, 2015 and 2016.  However, the House’s tax cut plan is about one-third the size of the Senate’s and would largely focus on increasing the state’s standard deduction (the Senate plan also does this along with more cuts in the personal and corporate income tax rates).
• After a 4-day special session, Minnesota lawmakers passed 10 budget bills including $650 million in tax cuts, which the governor has subsequently signed, but not without defunding the legislature in the process.
• New Mexico‘s special session ended with a balanced budget in the short-term but no long-term solutions to its structural deficit as Gov. Martinez signed off on a budget for higher education spending, funded through a one-time complex bond transaction, while rejecting all proposed tax increases.
• On the last day of their legislative session, Oklahoma lawmakers sent a $6.8 billion budget to Gov. Mary Fallin’s desk. However, legal challenges remain and state services continue to be underfunded. Tax changes include a $1.50/pack smoking cessation fee, motor vehicle sales tax changes, raising the rate on some horizontal wells, and sunsetting rebates and exemptions on the gross productions tax.
• Illinois lawmakers have one more day to pass legislation before requiring super-majority support for passage, but the House is still short the votes needed to pass tax increases from the Senate or its own chamber. Even if lawmakers successfully passed legislation, it’s unlikely that the bills would pass muster with Bruce Rauner.
• The Louisiana House is scheduled to vote today on a bill that would increase the gas tax to fund infrastructure projects.
• District of Columbia city council members recently debated whether to allow a legislative “trigger” to cut taxes for the district’s wealthiest residents or to delay those cuts to devote funding to local needs such as homelessness and education. Ultimately they allowed the tax cuts to take effect.
• With Gov. Rick Scott’s signature, Florida is now the 14^th state to exempt tampons and other feminine hygiene products from sales tax.
• The credit rating agency Moody’s has issued a new report on New Jersey‘s budget troubles, forecasting a $3.6 billion budget gap by 2023 and stating clearly that tax increases will have to be part of the solution if the state is to get itself back on track.
• In Wyoming, legislators are considering tax increases to ease the state deficit driven by energy-sector reliance. A legislative committee has been tasked with finding new sources of revenue. In anticipation of the committee’s November report, local communities have begun looking into raising their own revenue.
• While the details of a proposed commercial activities tax in Oregon are becoming more plentiful, support for major tax reform in the state continues to lag.

What We’re Reading…

• Politico reports that state and local leaders are coming together around federal policy issues, particularly the potential elimination of the federal income tax deduction for state and local taxes paid, though there is increasing doubt that Congress will pass tax changes this year.
• The North Carolina Budget and Tax Center published a report on costs of trickle-down tax cuts in the state. It features an ITEP analysis that found the state would have at least $2.8 billion more in revenue this year absent the tax cut spree lawmakers have been on since 2013.
• Also worth reading in North Carolina- this piece from the Asheville Citizen-Times that finds agreement amongst most economists that the state’s tax cuts have not boosted the economy despite contrary rhetoric from lawmakers.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at [email protected]. Click here to sign up to receive the Rundown via email.

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