Sin taxes will certainly be raised and money will be allocated from the Rainy Day Fund and the BP oil settlement. Other options being debated include increasing state sales taxes one cent and raising gasoline taxes. The problem with increasing sales tax one cent is that it would give Louisiana the highest local and state sales tax rate in the nation. Thus, a compromise of a half-cent increase might be the ultimate solution.
At the end of the special session, the budget hole will undoubtedly be filled in the short term. Of course, there is a much bigger budget deficit to address for the next fiscal year. At the same time, it is time to address some long term problems with state government.
As frequently noted by State Treasurer John Kennedy, the state has 19,000 consulting contracts, with millions of dollars flowing to out of state firms. These services need to be performed by state government employees, especially since many managers are just supervising one employee.
Not only are there concerns about consulting contracts and management practices, but there is also little doubt that the state has too many government employees.
According to Governing Magazine, Louisiana has 298 state workers per 10,000 residents, the 5th highest rate in the country. There are 34 states that have fewer than 250 state workers per 10,000 residents, so there is obviously plenty of areas for the state to trim spending.
In the area of higher education, the TOPS program is facing the chopping block, and more cuts to higher education are being considered. Instead of draconian cuts, it is time for realistic consolidation. The state has too many colleges and universities, in fact, more than the State of Florida which has a much larger population. Thus, there is duplication on college campuses and some facilities, such as University of New Orleans, are struggling just to stay open.
This antiquated arrangement forces state taxpayers have to fund multiple boards of higher education, when it would be simpler and less expensive to have just one. The legislators concede in private that such changes are needed, but it would be politically difficult to eliminate cherished fiefdoms for certain insiders. These excuses are not valid in a time of fiscal crisis, we need massive reform and the time is now.
Another area in desperate need of reform is how we tax businesses in Louisiana. According to the legislative auditor, Louisiana has granted 464 tax exemptions totaling $7.9 billion, which is $400 million more than the state actually collects in revenue each year. Many of these exemptions have been granted in recent years without sunset provisions.
A better idea is to lower the overall tax rate for businesses and begin to eliminate all of these special deals for specific industries. The state currently has an 8% corporate income tax rate, the 13th highest in the nation. Louisiana is also one of only 16 states to levy a corporate franchise tax, another disincentive for businesses to move to Louisiana.
The time for the sacred cows is over in Louisiana. Legislators and the Governor need to start to address real reform, as opposed to just creating a one-time budget fix. This is the year for change, the first year after an election. If our politicians waste this opportunity, all of them need to be replaced in the next election cycle.