The Louisiana Legislature recently wrapped up yet another special session that wound down to the last day before a deal was struck to make cuts and use $99 million of the Rainy Day Fund to fill a $304 million budget gap.
But with the state facing another $440 million shortfall for the next fiscal year as it prepares for the start of the regular session on April 10, Business Report Publisher Rolfe McCollister says the state’s budget battles are far from over.
“To stop the merry-go-round, we will have to address the long-awaited and much ballyhooed “tax reform”—which will require tough choices and create a vicious battle. Will it work?” McCollister writes in his latest column. “Our history has proven that patronage and poverty in Louisiana have both been very expensive. Populism may have been good for political careers in the past, but the chickens in our pots have come home to roost.”
There will be no easy answers for tax reform, McCollister says.
“The Task Force on Structural Change in Budget & Tax Policy, chaired by Secretary of Revenue Kimberly Robinson and economist Jim Richardson, issued its report with no real surprises,” he writes. “It has recommendations on sales, income, corporate and ad valorem taxes, as well as economic development incentives, budget and spending practices. There is no silver bullet.”
The Louisiana Association of Business and Industry has said it supports some ideas about tax reform and questions others, but LABI President and CEO Stephen Waguespack recently noted: “We must begin to acknowledge that even with an ideal tax code, spending projections are still likely to outpace revenue growth in the years to come.”
“This raises a philosophical issue: Does Louisiana want big government or less government, and what are we all willing to spend going forward?” McCollister writes. “And if we can’t afford things provided by the state in the past, do we drop them and let local parishes or institutions (like universities) have the authority to decide if they want to raise the revenue and provide for residents or customers? That would be equivalent to letting the free market work.”
Though the public is often told all the “fat” and “waste” has already been cut, McCollister says you might be surprised to find out that this year’s fiscal year budget is still over $2 billion more than the 2015-2016 budget.
“Spending grew more. Many like to claim that ‘we’ve cut to the bone’ and this is simply a partisan problem caused by the anti-tax Republicans,” McCollister writes. “They are wrong. There are options, but most folks don’t want to ‘go there.’”
Read the full column, in which McCollister also makes his case for why the Industrial Tax Exemption Program needs to be streamlined to allow local officials to give final approval of applications. Send your comments to editors@businessreport.com.
