House backs some tax breaks, but GOP kills Blanco spending plan

BATON ROUGE, La. (AP) _ Lawmakers expected to wrap up Gov. Kathleen Blanco’s special session two days early, after House Republicans refused to raise a spending limit, blocking $2 billion of Blanco’s budget plans and downscaling the scope of the session.

With many of Blanco’s plans derailed, House and Senate leaders said they expected to end the session on Friday rather than working until the Sunday deadline.

Pay raises for teachers, university professors, police, firefighters, prison workers and other state employees were sidelined, along with money for road construction, debris removal after hurricanes Katrina and Rita, and other spending items proposed by Blanco.

The House passed a $300 million package of tax breaks for homeowners and parents and set aside money for incentives to attract a German steel mill to south Louisiana. Those appeared to be among the only bills on the session agenda, which was set by Blanco, that would get through the deadlock. They still must be approved by the Senate.

Though House Republicans stalled most of Blanco’s agenda, senators also complained about the speed in which the governor had tried to pass the spending plans. The Senate on Wednesday unanimously approved a resolution saying they would hold hearings on Blanco’s spending plans after Jan. 1.

“None are so urgent that they cannot wait for a more deliberative discussion that can take place after the first of the year,” the Senate resolution said.

Blanco said she would try the spending plans again next year. Lawmakers return for a regular session in April.

“We’re not going to move forward as rapidly as I envisioned Louisiana moving forward, but we have done some good things,” Blanco said.

After the spending cap change was blocked, the governor’s allies in the House refused to bring up Republican-sought and Blanco-backed tax breaks for businesses and for people adversely affected by the tax changes included in a tax overhaul known as the Stelly Plan a few years ago.

Both Democrats and Republicans said they tried to compromise. Each side labeled the other obstructionist, in a rare example of partisan voting not seen much in Louisiana until the past two years. “Much to my dismay, I suspect it’s a precedent we’ll see in the future,” said House Speaker Joe Salter, D-Florien, a longtime member of the House.

The ongoing debate over spending involves $1.6 billion in unspent cash this year and an expected $827 million surplus from last year. Much of the money comes from boosts in state tax revenue in the post-hurricane recovery and from higher oil and gas prices.

Blanco called the special session to spend much of the cash.

But a constitutionally set spending limit blocks the state from spending any more than $194 million of the largesse. To raise the cap and reset the spending limit requires a two-thirds vote, and Republicans make up more than one-third of the House _ more than the number of votes needed to block the spending cap change.

Nearly all the GOP members of the House refused to boost the spending limit, saying the governor was trying to spend too much money, with too little discussion with the Legislature. They said the state’s finances were too uncertain because of Katrina and Rita.

“I was called here so the administration without communication, without input, could give away $2.5 billion to try to raise their stock for next year’s election,” said Rep. Ernest Wooton, R-Belle Chasse.

GOP lawmakers in the House were willing to commit the state to tax breaks that will cost the state year after year _ a point that rankled many Democrats, who complained that the Republicans wouldn’t vote to raise the cap even on one-time spending items.

“We don’t want to rush to do fiscally responsible things, but we want to rush to do tax credits which have a negative impact on the state budget this year and years on out,” said Rep. Taylor Townsend, D-Natchitoches.

Four items passed unanimously in the House and went to the Senate for a vote. Lawmakers agreed to give a $75 per child tax credit to parents, which carries a nearly $54 million annual price tag, and to extend an existing tax break for steel companies until 2009.

They also approved the creation of a tax credit for homeowners who are paying higher insurance rates because of the Louisiana Citizens Property Insurance Corp. The state-run insurer of last resort borrowed $1 billion to pay off Katrina and Rita claims, and those costs are being passed along to all insured homeowners in the state, not just Citizens customers.

The tax credit is expected to cost the state $239 million this year and as much as $1.8 billion total through 2027.

The final item winning House approval would establish a $300 million fund in the state treasury to pay for roads, port improvements and other infrastructure to help lure German company ThyssenKrupp Steel AG to a site along the Mississippi River between Baton Rouge and New Orleans. Arkansas and Alabama also are bidding for the project. Any money to be spent out of the fund above the spending cap, however, will require a separate vote from the Legislature.

Blanco and lawmakers said the creation of the fund would show the state’s commitment to attracting the mill and its 3,000 new jobs as ThyssenKrupp representatives meet with the governor on Thursday to continue negotiations.