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Lack of courage prevents reform of any LA budgeting

As talk of the state’s operating budget dominates Louisiana political discourse, highlighting how a failure of will by policy-makers makes this an annual exercise in contortion, an enterprising piece reminds how the capital outlay budgeting process suffers from the same.

Jeremy Alford writes about that latter exercise, which, while just a couple of billion dollars in cash and about twice that in bonds of which only a few hundred million goes to new projects compared to the operating budget that is over four times that combined total, itself nonetheless causes dysfunction. Unlike with the operating budget, the bizarreness of which comes from a straitjacketed fiscal system that poorly matches revenues to expenditures on the basis of need largely because lawmakers have given themselves so little discretion over it, with the capital outlay process legislators have a great deal of discretion but then in effect hand it over.

In both cases, these convolutions have evolved because they suit the needs of legislators. With the operating budget, passing so many statutes and along to eventual voter approval so many constitutional amendments has set aside about four-fifths of all state-generated revenues for particular purposes. Many years this manufactures a crisis among the few areas unlinked to money, causing great agitation as some portion of funds ends up backing low priority needs while those considered most important face cutting and tremendous gymnastics to get covered whatever of them can be.


Avoid convoluted funding scheme with tuition increase

Why go to all this trouble? Peripherally attached to a budget somewhat contortioned, perhaps the most convoluted item of Gov. Bobby Jindal’s fiscal year 2016 effort is a request (not actually in the budget) that cuts in state monies for higher education could be offset partially by an extra fee put upon students, the cost of which would be claimable as a tax credit, financed by an increase in cigarette taxes. Why such a Rube Goldberg device when there’s a far less complex answer to bolster higher education’s resources?

Administration and higher education officials have put forth preliminary ideas on the subject, pegging an amount of $2,000 per student (per what unit of time left as of now unsaid, but it may be for an academic year), although that could vary by field of study and institution. Whatever structure it takes, for this to happen it would take two sets of two-thirds majorities in each legislative chamber, one to add the fee and one to increase the cigarette tax, while then needing a majority vote in each to introduce the tax credit. And then it would cost extra to administer the complicated thing and probably (the history of tobacco tax hikes show) take in fewer dollars than anticipated, meaning taxpayers pick up the tab to pay for the credits – which may not do much or any good for the small portion of households whose tax liability does not equal the fee.

The far more obvious and elegant solution to bring in more money to higher education is to raise tuition. As noted previously, with average Louisiana tuition and fees the fourth-lowest among the states and the District of Columbia for baccalaureate-and-above institutions and 39th overall for community colleges, with the state ranking in proportion of family income going to pay for higher education 38th and 32nd, respectively, with its former students having the lowest proportional student loan debt of any state in the south and among the lowest in the nation, and with a per capita income ranking 29th nationally, clearly the ability for Louisiana families to pay more for their members’ education is present – especially as historically taxpayers have disproportionately paid for higher education in Louisiana compared to the rest of the country. It’s time the major beneficiaries of higher education – the students themselves – pay their fair share as a response to the lowering of the taxpayer subsidy instead of finding another way to have a portion of taxpayers make up the difference.


Commissioners must stop suit, withdraw from program

As if the Caddo Parish Commission wasn’t getting enough unfavorable publicity in January, in February more came down the pike that reinforces the notion that service on the body seems more in self-interest than in the public interest.

The Louisiana Legislative Auditor issued a letter that questioned the legality of parish commissioners – at least 15 since Art. III, Sec. 2-52 of the parish’s ordinances went into effect in March, 2000 – being allowed to participate in the Caddo Parish Employees Retirement System. The Louisiana Constitution was amended in 1996 to prevent elected after beginning of 1997 any part-time official, mentioning by name kinds of bodies that serve as governing authorities, from participating in a retirement plan run by that subdivision. Every present sitting member of the Commission was elected after that date (with Ken Epperson and John Escude having breaks in service even as they had served prior to that date).

Ridiculously, the parish wasted taxpayer dollars by filing for a declaratory state court judgment about the ordinance (which was amended in 2005) even though Art. X, Sec. 29.1 of the Constitution seems very clear about this. Only absurdly concluding that as the literal wording excludes members of a “police jury” or “parish council,” somehow a “parish commission” would be exempt, extraordinarily contrary to what is meant by and the spirit of the law (as argued in two separate attorney general opinions).


Couple inventory tax credit change with broader reform

Thrust into the spotlight by becoming the crucial fulcrum on which Louisiana’s fiscal year 2016 budget balances, the state’s inventory/ad valorem tax credit reflects the inefficient, strange outlier tax behind it where the abolition of which would promote fairness and better potential for economic development.

Gov. Bobby Jindal has asked the Legislature to remove the refundable portion of this tax, or about three-quarters of its take and equals about $377 million, in its upcoming regular session. This could take the form of a suspension lasting around a year, which may require only simple majority votes, or outright repeal, which would need two-third supermajority votes from each chamber. It rebates back to corporations not only part or all of their income and franchise taxes, but also part or all of local property taxes.

This odd element that state taxpayers forgo revenue on the basis of parish taxing decisions, and the lack of clarity and accountability for voters in understanding the impact of policy, may be the strangest aspect of the credit and its underlying tax. Only 10 states have such a comprehensive tax on the value of most movable property, comprised of domestic, non-transitory resources, and finished products, and only Louisiana oddly does not levy the tax at all at the state level, but allows parishes to do so; only a couple of other states allow levying at the local level even as they also levy one at the state level.


Tepid restructuring in budget can induce more reform

If readers, like myself, missed at the annual meeting of the Louisiana Political Science Association today the discussion of Louisiana’s fiscal year 2016 budget submitted yesterday by the Gov. Bobby Jindal Administration, this space will try to substitute in part for that.

This budget was in rickety shape from the moment the FY 2015 budget went into effect, courtesy of the bizarre fiscal structure of the state where four-fifths of revenues are dedicated to some purpose (state- or federal-determined) and the remainder of these responsible for health care, higher education, and constitutional offices. As problematic as that is, it was manageable, but the legs got kicked out from under it when extraction royalty and severance tax revenues took a nosedive due to sharply falling oil prices.

Thus spurred ideas to balance, leading to three interrelated aspects of the FY 2016 budget, which drops total state spending from enacted levels for FY 2015 over a billion dollars – although notably that amount still is higher than actual spending of two years ago by about $800 million, which is an increase about at the rate of inflation. In order to accomplish this, higher education was reduced from FY 2015 enacted to FY 2016 budgeted almost as much in that year as the entire $228 million (not adjusted for medical education) decline from FY 2009-15. Only because of an assumption built in that the Legislature would excise the refundable portion of a dozen tax credits did it not amount to an additional $526 million cut. And the budget turned in also suggested that the Legislature and higher education combine forces to infuse perhaps $100 million or so more in revenues into that system through various operational means and fees.


Any LA EITC retention unwise in upcoming budgeting

When Gov. Bobby Jindal reveals his fiscal year 2016 budget tomorrow, it looks as if he will continue the trend of advocating tepid solutions to Louisiana’s pressing budgetary difficulties and bypassing substantial reform of an inefficient and ineffective fiscal system.

As a consensus builds that the state must rein in overgenerous tax exceptions, Jindal offered that the state should cap tax credits that paid out beyond tax liability incurred at that liability. This week his administration estimated this amount at around $590 million. Retaining some portion in that neighborhood would go a long way to closing a budget gap between forecast revenues apportioned to dedicated purposes plus those going into the general fund and current expenditures plus an inflation factor that equals $1.6 billion.

But the Jindal Administration also indicated that some of this “excess” amount would end up off limits to retention, citing approximately $3 million in the form of the School Readiness Tax Credits and $21 million in the Earned Income Tax Credit that would continue to go to eligible recipients beyond their tax liabilities. The former, actually several related items with the one in question the only of five payable to families, kicks back money for a child under the age of six that attends a decently-rated or better child care facility, which essentially could be 150 percent of its federal version (unreduced by federal income tax liability, if any) for a family making $25,000 or fewer, with a $2,100 maximum credit. The latter allows for as much as 3.5 percent of its federal version, graduated by filing status and number of children; for example, a married couple with no qualifying children would have to earn less than $20,330 of which less than $3,400 could be investment income, and some of it would have to be earned through at least part-time work. A family with three or more children could be credited for $218.


Proposed film tax credit reform needs more robustness

The film industry has scrambled successfully to keep from drying up its mother milk from Louisiana taxpayers, if the suggested “fixes” to the Motion Picture Investor Tax Credit contained in proposed bills by a pair of timid legislators serves as an indicator.

In separate bill drafts, state Sen. JP Morrell and state Rep. Julie Stokes propose reforms of the state’s film subsidy, which through the life of the program to 2012 had cost the state $800 million more in taxpayer dollars than it brought in and which at the current rate of project approval will have topped $1 billion by the end of last year. Neither adequately address the hemorrhaging of taxpayer dollars.

Morrell’s bill closely tracks the industry’s preferences, which don’t align well with taxpayers’, with an increased emphasis on preventing improper or fraudulent subsidization, limitations of expenditures that qualify, and (the one major item not acceded to by the industry) a $300 million annual cap that, if not entirely used, could roll over. Stokes’ would allow transferability of credits just once (in effect, eliminating brokerage and leaving it all in the hands of the state) but raise the state’s buyback from 85 percent to 90 percent, institute better procedures to capture tax revenue that could be generated from the industry (an industry request), and make administrative changes that clarify the process and place more of that cost in the hands of that industry.


Democrats continue fool's errand for magic candidate

If it isn’t official, it should be: it’s John Bel or bust for Louisiana’s Democrats, as the filing of New Orleans Mayor Mitch Landrieu’s campaign finance report subsequent to his last year’s reelection shows – also indicating the dire straits in which the party finds itself largely through its own self-deception.

As recently noted, state Rep. John Bel Edwards’ non-trivial fundraising totals for the governor’s race this year revealed both that a consensus was forming that he was an adequate draw from the poor options out there to bear the party’s standard in 2015 and that Landrieu could not feel as if he was the natural selection by party activists to lead this charge. As late as last week, others still made noise about Landrieu possibly running, such as an official of the Democratic Governors Association thinking that Landrieu was “carefully considering” running and would be quite competitive.

Which tells us he doesn’t really know Landrieu or is whistling into a gale. Landrieu’s succinct report showed all he did was transfer the meager remains of his mayoral campaign account to a “future office” account. No funds were raised nor spent outside of that account aside from that election in 2014. Nobody not deluded about chances of victory runs for governor with $33,000 or so in the bank with just under a year to go.


Filings point to Nungesser-Young winner next lt. gov.

Having reviewed the implications of financial reporting for Louisiana statewide candidates’ chances for the governor’s and attorney general’s contests, it’s time to review the last of the hotly contested races to date, lieutenant governor. (It’s unlikely strong challengers will emerge to battle incumbents for the jobs of Secretary of State, Commissioner of Insurance, and Commissioner of Agriculture and Forestry, and add to this list of competitive races  Treasurer if incumbent John Kennedy chooses not to run for governor.)

State Sen. Elbert Guillory, a Republican, clearly rests on the back foot, reporting a less than zero balance. While adept at social media campaigning and able to rely upon the historical ability of black candidates to operate with a high voter per dollar rate, two factors will crimp his chances going forward, both having to do with his opponents.

One is that Baton Rouge Mayor-President Kip Holden not only is black as well, and therefore Guillory has no advantage over him with that considerable segment of the statewide vote, but also and unlike Guillory is a Democrat. That alone makes Guillory’s job tough because he could be competitive with those voters with resources to back his message, but he obviously doesn’t have the money at this point. Holden doesn’t have much either, cribbing off his local office account to have around only $30,000, but black Democrat candidates have the highest voter per dollar potential and he won’t need to raise a large amount to make a runoff – if he were the only black in the race. As long as Guillory continues in it, he’ll need to do somewhat better to get there.


LA inspection tax by another name needs abolishing

Louisiana may be grubbing for revenues at this time, but it acts best to emulate its neighbor by eliminating the almost totally useless vehicle general inspections and fees that are close to being a joke.

A number of states do not require vehicle inspections, and Mississippi look set to join the bunch as a bill to wipe out its inspection that carries a $5 fee makes its way through that Legislature. The activity might have been a good idea 50 years ago, but that time has come and gone.

Vehicles since then have become much more durable and safer, complete with required computer diagnostics to point out any serious problem instantly. As a result, data from about a decade ago when cars were significantly less safe than now show only a little over one percent of all accidents occur because of something wrong with the vehicle that would be part of an inspection – and involved items that easily could fail in between annual, or now in Louisiana biannual, inspections with little warning, meaning it would be blind luck if an inspection happened to pick up on it right before failure.