Louisiana Needs a Balanced Approach

Posted by: Tim Mathis

Louisiana is not alone in its struggle to provide for the needs of families and communities affected by an anemic national economy. With federal stimulus funds coming to an end, states are preparing to weather yet another fiscal storm, the largest budget shortfall on record. According to a report by the Center on Budget and Policy Priorities, state revenues are down 12 percent since the beginning of the recession while the demand for services has increased. This year, at least 40 states will face budget gaps totaling $125 billion.

In the past two years, 46 states including the District of Columbia have already reduced services that millions depend upon such as education, health care, public safety, and transportation. The depth of crisis will become more evident as states begin to roll out their 2012 budgets. Last week, the new governor of California proposed cutting $1.6 billion from the state’s Medicaid program and $1.5 billion from a program that provides financial assistance to 1.1 million low-income children. Legislators in Texas recommend cutting $5 billion for public schools and $1.5 billion for higher education, meaning fewer teachers bigger class sizes, and fewer course offerings. State lawmakers overestimate the positive effects of tax cuts and underestimate the negative effects of cuts to public services, often shooting themselves in the foot.

Austerity is not the answer. The problem is too big to solve through political expediency by using one-time dollars. Louisiana needs a balanced approach to bridge its $1.6 billion gap. Rather than relying on spending cuts alone, legislators need to focus on long-term solutions that include additional sources of revenue. It is estimated that tax cuts over the past five years cost Louisiana $850 million annually. We can reduce the gap through common sense tax reforms such as closing corporate loopholes, eliminating outdated tax exemptions, creating new personal income tax rates and brackets, and reforming sales taxes to include more services and internet sales. So far, at least 30 other states have responded to the crisis by increasing their taxes to balance their budgets. Louisiana needs to adopt this approach to invest in the health of its citizens, the integrity of its transportation infrastructure, and in educating its future workers so that we will be able to meet tomorrow’s economic challenges and take advantage of economic prosperity when it returns.

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