Panel offers explanations for La. budget crisis, few solutions

One day before Gov. Bobby Jindal’s administration unveils its plan to balance a state budget that is expected to be about $1.6 billion in the hole, the chairman of the powerful Senate Finance Committee says the state doesn’t need more revenue. It just needs to spend the dollars it has wisely.

“You’re not going to get a tax increase out of the Legislature at this session but you don’t need more revenues,” Sen. Jack Donahue, R-Mandeville, said during a luncheon panel discussion sponsored by Leaders With Vision. “You need to do a better job managing the revenues we have.”

Donahue was joined by economist and former University of New Orleans chancellor Tim Ryan, as well as Jan Moller of the Louisiana Budget Project and Patrick Mulhearne, director of Celtic Media Centre. The panel discussed the state’s budget crisis and explained why higher education and health care consistently have to bear the brunt of state funding cuts. In the budget proposal that will be released Friday, higher ed is expected to be cut as much as  $400 million, while health care will be slashed by about $290 million, not including federal matching money, Donahue said.

Though the panelists differed to an extent on what should be done about the problem—Moller advocates raising taxes while the others do not—all agree on the root cause: “The real problem is that we made poor decisions 20, 30 and 40 years ago that are now coming back to haunt us,” Ryan said. “I don’t know what we are going to be able to do about it.”

Donahue suggested the leaders of the state’s higher education institutions are at least partly to blame for their problems. The state has 14 four-year colleges and universities. For years, higher-ed leaders have come hat-in-hand to the Legislature, Donahue said, without ever making tough decisions to “reorganize themselves.”

“The system we’ve got is broken,” he said. “We’ve got to get higher ed to make some structural changes. Higher-ed leadership isn’t responsive to the problems.”

Another systemic problem the speakers pointed to is the state’s generous tax breaks and incentives. Though some of those incentives are tax credits—like those given to the movie industry—they comprise just 2% of the total $1 billion or so the state gave away last year, said Mulhearne, who cautioned against devoting too much attention to the movie tax credit program.

“If you do away with that 15,000 people will immediately be out of work and you’ll lose millions of dollars in investment,” he said. “You don’t want to create a bigger problem than you already have.”

A better tax break to target, according to Ryan, is the industrial tax exemption, which exempts manufacturing companies from having to pay property taxes.

“We have this goofy homestead exemption so we have to balance that out so that companies don’t have to pay all the property taxes,” he said. “So we started out with one mistake and balanced it with another mistake. These aren’t economic development incentives. They’re just things that were done because we have an imbalanced tax structure.”

Though speakers were long on causes and overarching solutions, few had specific ideas for how to balance the current budget without gutting higher education and health care. Donahue said a constitutional convention to restructure the state’s tax code was not likely and wasn’t necessarily a good idea.

“You don’t know what might come out of it,” he said. “It might be worse than what we already have.”

—Stephanie Riegel

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