Jim Richardson, chairman of LSU’s Public Administration Institute and professor of economics, says there’s no reason to believe oil and gas will lift Louisiana out of its economic problems and that, in fact, the state should make sure it doesn’t depend on high oil prices to fund ongoing programs. That overdependence on the oil and gas market is largely to blame for the state’s current fiscal troubles. What Louisiana should do, Richardson says, is put all oil revenues that exceed $1.25 billion into a “permanent endowment budget stabilization fund” or rainy day fund to serve as a buffer against inevitable reductions in revenue.
“Alaska does that. Texas does that. We can do it, too. If we’d been wise, we would have done it about 30 years ago,” he told the Baton Rouge Press Club today.
However, the “payback period” for replenishing the fund needs to be reevaluated. Unlike current law, which demands the rainy fund be replenished immediately and thus makes the fund difficult to use, the state ought to allow a three-year window, Richardson says.
He says the state also should reconsider tax cuts already approved by the Legislature and suggests changes to the state’s personal income tax rates to reduce fluctuation in tax collections. Richardson proposes a 1.75% tax on the first $25,000 of earnings instead of the current 2%; 3.5% on the next $75,000 instead of the current 4%; and 4.5% on income above $100,000 instead of the current 6%. Richardson calls for the elimination of deductions for excess itemized deductions and federal tax liability.—Steve Clark
