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Budget Deal Reached – Details a Little Murky

By Vernon Billy - September 15, 2008

The old saying “better late than never” seemed appropriate as legislative leaders announced Sunday that they have reached a budget deal.

Seventy-six days after the start of the new fiscal year, the four legislative leaders announced the outline of their agreement.  Both sides acknowledged that they did not get everything that they wanted, but the deal represents a compromise that should end the stalemate.

Republicans won by preventing the Democrats from implementing new taxes on personal income, and defeating the Governor’s temporary one cent sales tax proposal.

Democratic leaders, on the other hand, claim they were able to protect their highest priority – education funding – from massive cuts.

While full details of the deal will not be known until the proposal is put in bill language form, and the companion implementing budget trailer bills are released, the elements of the deal apparently include the following:

  • Funds education at $58.1 billion, which is about $1.3 billion more than the Governor’s May Revise.  Based on these numbers, it appears the legislature eliminated an amount equal to the K-14 COLA provided in the Budget Conference Committee.
  • $9 Billion in unspecified cuts.
  • Closing so-called corporate tax loopholes, including the ability of businesses to deduct net operating losses.
  • Implementing “accelerated revenues” for the current fiscal year.  It is our understanding that this proposal requires companies and others paying quarterly taxes to pay a higher percentage at each payment.
  • No new taxes.
  • Establishes some type of process for mid-year cuts.
  • Some type of Lottery Securitization/expansion component.

The legislature is expected to vote on the deal on Monday or Tuesday. 

At this point we do not know if the Governor intends to sign the legislature’s budget compromise. If the Governor does not sign the budget, our capitol sources tell us that there is a real possibility that the legislature may seek to override his veto. 

And while legislative leaders were able to reach a compromise on the state budget, it appears that they did not deal with the real problem – the state’s structural deficit and lack of revenue.

Unfortunately, this budget deal appears to be the “get out of town” budget we have previously mentioned as a possibility.  This gimmick-based budget will thrust the state into the same fiscal mess and political quagmire in less than five months, when the Governor must release his January budget.

On second thought, perhaps “better late than never” is not where we actually want to be…

Editor's Note: Vernon Billy  is a managing partner of Education Media Group, LLC and is president of Governmental Solutions Group, LLC, a policy consulting and legislative advocacy firm.