Governor John Bel Edwards

Second Special Session of the Louisiana Legislature

June 7, 2016
Louisiana State Capitol

As prepared for delivery:

Mr. President, Mr. Speaker, Members of the Legislature, Honored Guests, My fellow
Louisianans:
Good morning. Here we are again.
Ive called you back here even though it might feel like youve never left because weve got
unfinished business to tend to. That unfinished business is the difference between whether
TOPS is fully funded, whether hospitals in the districts you represent remain open to serve your
constituents, and whether were going to stabilize our great state and put this budget crisis behind
us once and for all.
Weve been through a lot together since being sworn into office a little less than six months ago.
Since January, weve faced three natural emergencies. Weve eliminated a $940 million budget
deficit for this fiscal year and whittled down the coming years deficit from more than $2 billion
to $600 million. Weve cut spending to the tune of $230 million in the current fiscal year alone,
implemented a statewide hiring freeze, and underwent an unprecedented review of government
contracts all in an effort to operate government more efficiently and save taxpayer dollars.
And weve begun the process of bringing our federal tax dollars back to Louisiana through
Medicaid expansion, which will save more than $180 million for our state in the first year alone.
But while we all may be getting weary of what is beginning to feel like a never-ending
legislative process, there is still more important work left to do. The people who sent us here
expect us to finish the job. If we dont reduce this $600 million deficit, we force critical state
services to remain unfunded next year. We still have a real mess on our hands, and the longer
we put off cleaning up that mess, the more damage we do and the more problems we create for
ourselves down the line.
And dont forget, the $600 million represents the amount needed for a truly stand still budget
the ability of the state to provide the same level of services without accounting for inflation, and
merit raises for state employees, among other things.
However, we have something right now that we didnt have at the start of the first special session
a budget plan for next year. If we can all agree on one thing, its that we dont like that budget.
I dont, and you dont. Because it is so ugly, I came down to the legislature to present it myself.

$75 million short for K-12 education

$54 million cut from higher education
TOPS is $155 million short

$174 million cut from critical, life-saving health care services our public-private
partnerships, waivers, and critical Medicaid services

And while it is not the budget that you or I want implemented, it is one of the most honest,
disciplined budgets weve seen in a long time. It contains no one-time funds, no fund sweeps,
and it keeps the transportation trust fund whole by ensuring that the gas tax goes to its intended
purpose our infrastructure needs roads, bridges, and ports.
Unfortunately, we cannot ignore the costs the previous administration pushed into this year. For
instance, for the first time in our states history since the Medicaid program was formed my
predecessor failed to budget for any Medicaid utilization increase. They ignored it. To make
matters worse, they only made 11 of their 12 vendor payments, leaving next years budget with 2
utilization increases and 13, rather than 11 vendor payments. These are the kinds of tricks and
gimmicks that have made our budget crisis even worse. The days of kicking the can down the
road are over. The day is reckoning is at hand.
Thats why Ive called you back into another Special Session now. The need is urgent. There is
no time for delay. Our students cant wait. Our hospitals cant wait. Our disabled citizens cant
wait. Our universities and community and technical colleges cant wait. K-12 schools cant wait.
And simply put Louisiana cant afford to wait. We must fix our problems now. The good
news is that the people of Louisiana know we are in a fiscal crisis and they expect actually they
demand that we make the hard decisions necessary to fix it.
So for the next two and a half weeks, we need to be focused on two main goals.
One is to clean up work from the first special session. The penny sales tax cannot and should not
have ended up on school lunches, Girl Scout cookies, or many other items. The frantic pace of
the final moments of the previous special session led to some unintended consequences that we
need to fix. Therefore, a great deal of my call is focused on removing taxes.
Second, we must enact real, meaningful tax reform and close the $600 million deficit remaining
for the fiscal year beginning July 1. Thats less than a month away, if you needed any more
sense of urgency.
In order to do this, the task force you and I created has provided a framework for us to get the job
done right. My proposals for this session are fully consistent with that framework. These arent
the recommendations of a Republican task force or a Democratic task force; this is what a group
of bipartisan economists and business leaders are telling us we need to do if we want Louisiana
to prosper again.
Some of the items in the call should be no brainers.
One item, a tax on certain health insurance premiums, has already passed the legislature during
the first special session with a two-thirds vote. Unfortunately, CMS did not approve our plan.
But we are confident that the version of the bill for this session will gain CMS approval because
the increase will be more broad based, and we will actually be reducing it from the 6 percent
levied in the first special session to 5.5 percent.

Im also asking you to reduce the excess itemized deductions on individual income taxes. This
proposal would bring our deduction to 57.5 percent what it was before we even implemented
the Stelly Plan. But, the best part about this proposal is that it will not impact 74 percent of the
individuals in our state; and at 57.5 percent, it fully protects charitable donation and mortgage
interest deductions.
There are other proposals as well, including bracket compression and single sales apportionment
on corporate income and franchise taxes.
Many of these proposals have been discussed in Louisiana for years; the only difference is that
we dont have the option of waiting any longer.
We have the opportunity right now by working together to fully fund TOPS, to keep our
hospitals open, to fund K-12 education, to avoid the 8th straight general fund cut to higher
education already the biggest disinvestment in the nation over the last eight years and to get
ahead of the game on reforms we already know we need. In short, we have the opportunity, and
I believe the obligation, to stabilize the state and finally put an end to this fiscal crisis.
These changes will be a down payment on long-term, comprehensive tax reform that we will
tackle in April 2017.
Youve heard me say this before, but we need no, we have to make the harder right choices
in the next two weeks, rather than the easier wrong ones that could have negative long-term
effects on our state. The days of patching our budget together through duct-tape solutions,
maxed out credit cards and misguided fund sweeps is over. Its time to turn the page to long
term budget stability. I'm not just asking you to get the job done: I'm asking you to get the job
done right and to do it right now. The people of Louisiana are demanding this.
Nobody likes the diagnosis of our fiscal crisis, and nobody likes the prescription, but we have to
take our medicine.
I know there hasnt been much of an appetite around here for additional revenue. Look, its a
hard pill for me to swallow, too. Contrary to what some folks might say, I do not want to raise
additional revenue. Let me say that one more time for anyone in this room who didnt hear me
raising revenue isnt something Im happy about nor is it something I take lightly. But just as
weve made significant cuts in spending, we also need to focus our attention on restructuring the
states tax code.
Credit agencies have seen through the illusions of the past and downgraded our credit twice this
year once after the first special session because of the temporary nature of the changes and
because they only partially addressed the problem. And, they have threatened to do it again if
we dont get our act together. It took eight years to create this crisis, and I know the damage
cannot be fully repaired in one, two, or even three sessions, but we cant ignore our problems
like we have in the past.
More importantly, the people of Louisiana shouldnt have to be here year after year pleading for
quality, affordable education or begging that life-saving waivers and Medicaid services are
preserved. Lets always remember that we work for the people of Louisiana. They honored us
with the opportunity to serve. Lets live up to their expectations and get our act together. We all

know what needs to be done. We simply have to look within ourselves and find the political
courage to get it done.
For those of you who think this special session isnt necessary, or that delaying it well into the
fall is an option, Id ask you to consider how this wait and see approach has worked in the
past. I cannot imagine a more irresponsible plan.
As Ive said, credit rating agencies are watching us. Our public-private partnerships are in
jeopardy. School starts in August. We have the revenue estimating conference for a reason.
They arent fortune tellers, but they give us the best outlook possible. Sometimes, as was the
case last year, they over-estimated the amount of revenue we would collect. Theres no reason to
believe that cant happen again. But, we cant be in the business of wishing and hoping that
additional funds are available, only to find out down the road that they arent. Annual mid-year
cuts destabilize our critical institutions and punish our people too.
The pots of one-time money were accustomed to finding by this point are gone. The previous
administration robbed Peter to pay Paul, drastically reducing our cash reserve funds from more
than $9 billion to $5 billion, including raiding and depleting the Medicaid Trust Fund for the
Elderly. But even if a large amount of one-time money were available to us, I would reject that
approach. The Legislative Auditors report this year showed that Louisiana has faced deficits
annually averaging $1.2 billion for the last five years. The report cited the repeated use of
borrowed money and non-recurring revenue as reasons for increased deficits and credit rating
downgrades.
But thats not the only problem our state faces an even bigger problem our cash flow. The
irresponsible budget practices of the previous administration drained virtually every dollar held
in funds which the state has used to insure adequate cash flow as revenue arrives during the year.
Our fiscal advisors are now telling us to brace for a cash flow problem, even if we raise the
dollars necessary to appropriately fund our needs - not our wants. Because most of our states
revenue comes in the second part of the year, yet our expenses are spread out evenly throughout
the year, our ability to borrow from other funds within state government, known as interfund
borrowing, is severely limited. Let me put this into perspective. In 2010, we had $4.8 billion at
the end of the fiscal year to cover $285 million in expenses. Today, we only have $2.5 billion
available to cover $1.7 billion in expenses. That, in itself, is a very serious problem.
The tricks and gimmicks wont work anymore.
Its time for us to put a budget plan in place that is worthy of the people of this state.
I know we wont always agree, and I respect that. I sat where you are sitting right now, and
listened to a governor make empty promise after empty promise. To make it worse, he didnt
include legislators in the process and ignored the people of Louisiana. Thats not the way I
operate. You may not always like what I have to say but you can rest assured that I will always
be open and honest. In addition, I have spent countless hours meeting with you, debating ideas
and listening to your concerns, so that together, we can choose a path forward that puts people
over politics - that puts Louisiana first. Im here to tell you that your constructive ideas, your
involvement, your input will not go unacknowledged. But make them constructive. Too many

people are taking their cues from Washington, and too many people have already spent enough
time there to learn the art of distraction.
Lets work together.
I hope, by this point, you know that my door is always open - whether youre a Republican, a
Democrat, or an Independent. Compromise is not a dirty word, and I am very hopeful that we
can work together to address these challenges, not just in this special session, but in the months
and years ahead.
Its time to get this crisis behind us so that Louisiana can thrive, not merely survive.
The breeze of hope we felt on January 11 is still alive. I feel it. The people of Louisiana feel it.
Lets harness that momentum and discover the bright future that awaits us. Our best days are
ahead, but only if we make our best effort now to fix our problems.
I believe in the awesome power of prayer. So, I am, once again, asking the people of Louisiana
to pray for everyone in this room all of you and me as we begin this work, and I will do the
same for all of you.
God Bless You. God Bless America. And God Bless the Great State of Louisiana.
Lets get to work.