This week in state budget crisis headlines
Gov. Edwards details government spending cuts to fill budget shortfall
Gov. Edwards emphasized that his proposed budget solutions for the $940 million budget deficit this year and the $2 billion deficit next year includes significant cuts to how much the state spends writing checks every year to issue refunds for tax credits, rebates and other tax benefits.
He pointed out that well over half of his package of proposals to the legislature to solve the $940 million budget crisis this year – or at least $537 million – consists of spending cuts and non-revenue raising measures, including the following:
• $128 million Rainy Day Fund dollars
• $200 million Non-coastal BP settlement dollars
• $160 million in governor’s, JLCB, and legislatively approved cuts
• $49 million Cutting state spending in issuing refunds for tax credits, rebates and other tax benefits
“The previous administration blew a hole in our state budget by writing checks for tax credits, rebates, or refunds to corporations with no consideration of whether Louisiana receives a good return on our investment,” Gov. Edwards said. “Cutting spending should also include evaluating tax expenditures and subsidies our state gives out. This will help us strengthen the fiscal foundation of our state over the long term.”
At a time when Gov. Edwards is fighting to protect higher education, the TOPS scholarship program, and critical health care services, Louisiana continues to be among the nation’s leaders in subsidies to business. Louisiana ranks fourth highest in the nation in the subsidies provided to businesses – just below New York, Michigan, and Washington. Louisiana’s subsidies to business are double the State of Texas and 4.5 times Alabama.
“People need to understand that state government spending isn’t only when the state pays state employees, builds a state building or buys a state car,” said the governor’s Commissioner of Administration Jay Dardenne. “The state government spends hundreds of millions of dollars every year writing refund checks or rebate checks to businesses and corporations, or giving up tax credits that we would otherwise charge these businesses for doing business here in Louisiana.”
The governor’s proposed cuts to this kind of state spending in tax credits, rebates and refunds include the following proposals:
• Suspending refundable ad valorem tax credits for business inventory, decreases credit next year.
• Reducing vendors compensation payment and payments to tobacco wholesalers, alcohol wholesalers and retailers for collecting and remitting state sales tax
• Reducing investment tax credit for insurance premium tax insurance companies pay.
• Removing 2018 sunset provisions to three 2015 Acts passed, so that the state continues reductions to tax credits, refunds and rebates.
Louisiana voters make message clear: Raise tobacco taxes by $1.25
A new poll shows Louisiana voters of all party affiliations strongly support raising
the state’s cigarette tax by $1.25 a pack as a smart solution to closing the state’s serious
budget shortfall, while saving lives and health care dollars. The poll also finds that 75
percent of voters are more likely to support a candidate who supports a tobacco tax
increase.
“As Louisiana legislators address the state’s dire $1.6 billion budget deficit, these poll
findings show that voters have a rather clear message for them: fix the budget, raise
tobacco taxes – and raise them by a lot,” said T. Bradley Keith, director of Invest in a
Healthy Louisiana, a coalition of health organizations.
When asked about potential ways the Legislature could address the state’s budget
crisis – including spending cuts to Medicaid, higher education, road improvements and the Department of Children and Family Services, as well as hikes in the state’s income, sales or property taxes -- the results were clear. Voters were intensely opposed to most of them, except for one: increasing the state’s tobacco tax.
More than seven out of 10 voters (71 percent) favor increasing the tobacco tax to address the budget shortfall, with a majority (56 percent) “strongly” favoring it. In fact, of all the tax increases presented to the voters polled, it (along with an alcohol tax) was the one that had the least opposition, with even 61 percent of smokers favoring a higher tax on cigarettes.
Edwards authors column in college newspapers
On Feb. 22, Gov. Edwards authored a column published in college newspapers across Louisiana focusing on the devastating cuts that higher education will face if the legislature fails to raise additional revenue.
“Students in Louisiana deserve better than what they’ve gotten from their state government over the last eight years. I’ll be the first to tell you that. The previous administration put the needs of an out-of-state special interest ahead of your own and made you pay the price for a political agenda. That stopped on January 11”, Edwards wrote.
“Unfortunately, the damage was done. Over the last eight years higher education institutions were severely weakened and Louisiana’s budget now sits atop the largest deficit our state has ever seen. Year after year, these budget deficits were patched using budget tricks and temporary funds. The state wrote checks to corporations it couldn’t afford, which left students with higher tuitions and campuses unable to invest in your education. In fact, Louisiana ranks fourth in the nation for subsidies to big business, double what the state of Texas pays, yet our higher education institutions were cut by more than $700 million – the largest disinvestment in the nation.”
The letter goes on to address TOPS and ask for students support in ensuring their schools don’t suffer in the budget readjustment.
“We’ve already seen too many of our young adults leave Louisiana for jobs and education in other states. That cycle must end.
Together, we can rebuild the future of Louisiana.”
Gov. Edwards says audit report demonstrates need to stabilize Louisiana Tax Code
On Feb. 22, Gov. Edwards commented on a report from the Louisiana Legislative Auditor that projects that in fiscal year (FY) 2015 the state will give away $400 million more in tax exemptions than it received in tax collections during the same year.
The report finds that Louisiana’s Department of Revenue is projecting the state will take in a total of $7.5 billion in tax revenue in FY 2015, but will give away approximately $7.9 billion in tax exemptions during the same time-frame.
“This is simply not sound fiscal policy. At a time when our state is faced with hospital closures and deep cuts to higher education, this $400 million would help us close the $940 million deficit this year,” Gov. Edwards said. “We can no longer afford to give overly generous tax breaks to business. It is time to stabilize our budget and broaden the base of our tax code, so that our people who work and educate their children here and the corporations that do business here are all treated fairly.”
The audit report further noted that, while most state tax revenue is generated by 40 different taxes, Louisiana now grants 464 different tax exemptions, a count that has steadily increased since 2010. The report also found that, of those 464 tax exemptions, only 52 have sunset provisions. According to the report, the vast majority of tax exemptions continue indefinitely without any evaluation of their impact or benefit to the state.
Legislative Auditor Daryl Purpera recommended the following:
• That all new or modified tax exemptions contain clear performance statements that include their public purpose and their expected outcomes.
• That the legislature should develop a schedule for how often reviews should be conducted or attach sunset dates to all exemptions that dictate when they should be reviewed.
• That the legislature should designate who specifically will conduct reviews of tax exemptions and what criteria will be used for reviews.