Two Reports Show Louisiana has a Revenue Problem, Not a Spending Problem

By Tim Mathis

Just as lawmakers begin to wrap up their annual budget debate, two reports – from opposite sides of the ideological spectrum – show that Louisiana’s chronic budget shortfalls are the result of low revenues, not  excess  spending as some critics like to claim.

The first report, from the conservative Tax Foundation, used U.S. Census data to show that Louisiana had the second-lowest  growth in tax collections last year. From 2010 to 2011, state revenues grew an anemic 1.2 percent. Only Hawaii, at 0.4 percent, grew at a slower pace.

The average growth rate among states was 8.9 percent – more than seven times higher than Louisiana’s. Neighboring states such as Texas (9.6 percent) and other energy-producing states such as Wyoming (14.1 percent) and Alaska (22.4 percent) are seeing revenue growth above the national average.

The second study, by the progressive Center on Budget and Policy Priorities, found that Louisiana had the nation’s largest mid-year gap between the cost of basic services such as health care and education, and the money available to pay for them. In fact, Louisiana has suffered two mid-year shortfalls  since the current budget was approved last June – a $251 million gap in December, which required a round of cuts to higher education and healthcare; and $220 million that emerged in late April, which legislators hope to patch with money from the state’s Budget Stabilization Fund.

Although more than 30 states have raised taxes as part of the way to deal with shortfalls, Louisiana has relied almost exclusively on cuts to critical services as its tax collections have slumped. Nationally, state tax collections have grown 6.5 percent over the past five years. But Louisiana tax collections have dropped by 7.42 percent since 2007, and have fallen by 20 percent over the past three years alone (Figure 1).

Although some of Louisiana’s budget problems can be blamed on the boom-and-bust cycle of our post-Katrina economy, other wounds are self-inflicted. Louisiana enacted the largest tax cuts in its history in 2007 and 2008, and followed those up with dozens of smaller tax breaks, exemptions and credits. This has created an ongoing gap between Louisiana’s needs and its resources. Through tax giveaways alone, Louisiana leaves more than $4.8 billion on the table.  Giving tax breaks to large, profitable corporations while raising tuition for college students, increasing K-12 class sizes, and firing teachers is no way to create jobs and build future prosperity.

The effect of these tax expenditures on Louisiana’s ability to fund higher education was criticized recently by the editor of the Baton Rouge Business Report, who said the long-term effects on the state’s ability to attract high-paying jobs would be devastating.

How much longer will it be before many of the companies this state is paying so handsomely to locate here find it’s impossible to hire qualified workers? How much longer will we accept a state that ranks 46th in the nation for education attainment?

It’s clear our state leaders have no stomach for restructuring higher education, but do they also have to kill our economic future?

At a time where knowledge, research and creativity have never been more economically important, Jindal and the Legislature are systematically destroying the very institutions that give birth to knowledge, research and creativity.

We need to invest in good schools, safe roads and bridges, quality health care and other building blocks of a strong economy that works for everyone.

They include details about safety-net programs like Medicaid, tax credits for low-income workers and educational scholarships and help promote a better understanding of how safety-net programs affect different communities across our state.
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