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Who's to be blame for Louisiana's budget sorrows?
Written by  // Wednesday, 22 February 2012 11:08 //

creditcardGov. Bobby Jindal loves to use looming budget deficits as justification for cutting jobs, shredding state retirement, and privatizing state agencies as ways to bring the state budget into balance and to make state government more efficient and accountable.

But if you examine the state tax exemptions that have become the norm since Jindal took office, you would have to conclude that the state’s financial plight is of his own doing.

The state did not have to fight off a threatened $1 billion deficit last year nor was it really necessary to look for ways to avoid a $900 million deficit this year, a likelihood of which he has already warned legislators.

The question is, did he intentionally create the state’s fiscal crisis in order to justify dumping off the Office of Group Benefits, state prisons, Medicaid, and public education and placing thousands of state workers on unemployment and costing them medical benefits in the process? Is he exploiting a deliberately engineered fiscal crisis in order to revamp the state retirement system?

As incredible as that might sound, consider his veto last year of a 4-cent-a-pack cigarette tax because he didn’t want to impose any new taxes. Forget for the moment that the cigarette tax was a renewal, not a new tax. And forget, if you will, that he was not opposed to an increase in college tuition because, in his words, it was not a tax but a fee.

Forget, too, that his veto of the cigarette tax was in effect turning his back on $50 million a year in badly-need revenue—$12 million directly from tax revenue and an additional $38 million in federal matching funds.

And finally, don’t remind him of his bumbling, stumbling, fumbling of two federal grants totaling $140 million. Those included $60 million in funding for early childhood education and $80 million to fund broadband internet connection to 21 rural parishes.

And the reason there is a crisis in the state retirement systems is because the Legislature and Jindal simply reneged on the state’s contribution requirements.

So clearly, the administration won’t consider new sources of revenue—like maybe eliminating some of the exemptions. Instead, the obvious solution is to require state workers to chip in an extra 3 percent to their retirement contributions.

It would be one thing if that 3 percent went to actually fund their retirements or even to pay down the UAL. Instead, it’s to be used to bail Jindal and the Legislature out of the consequences of their moronic tax policies.

While Jindal has never met a tax he liked, all the corporate tax exemptions that have gone into effect on his watch should raise a few eyebrows. Going into his fifth year in office, there have been at least 113 bills filed that deal with tax exemptions of one description or another. Some of those were duplicates and not all of them passed, of course.

Nor did all of them call for corporate tax breaks, but most did.

Figures provided by the Louisiana Department of Revenue reveal that for Fiscal Year 2006-07, the year before Jindal took office, corporate income taxes were $721 million against exemptions of $972 million.

For FY 2009-10, the last year for which figures were available—and three years into his first term—corporate income taxes dropped by more than half to $435 million while exemptions surged to $1.3 billion.

In some cases, there was not even an accounting of money lost to corporate income tax exemptions. Take the Louisiana Superdome and Zephyr Field, for example, both managed by SMG, Inc.

The Department of Revenue Report on Corporation Income Tax, under the heading “Exemption for Events, Activities, or Enterprises Conducted in Domed-stadium or Certain Baseball Facilities,” made the following observation:

“Any event, activity or enterprise conducted in certain domed-stadium (that would be the Louisiana Superdome) or any open baseball site owned and operated by the state (Zephyr Field), or any of its agencies, boards or commissions, with a seating capacity of at least 10,000 and has a professional sports franchise that participates in Class Triple A professional baseball is exempt from all state and local taxes. The purpose of this exemption is to promote use of the domed stadium.”

Under the heading “Beneficiaries,” was the explanation that “The increased use of the dome-stadium facilities benefits the state and its residents.”

Under the heading “Estimated Fiscal Effect,” the explanation was even more ambiguous. “We are unable to estimate the fiscal effect; there is no reporting requirement for the data.”

This is an exemption that went into effect on May 23, 1985, more than 26 years ago and there is no way to estimate the fiscal impact? There is no reporting requirement for the data?

Well, neither was any data as to the fiscal impact of the sales tax exemption for “state-owned domed stadiums” or sales by “certainly publicly-owned facilities.” Neither was there any explanation as to why state-owned domed stadium was pluralized.

At the same time, sales tax collections for 2006-07 totaled $2.8 billion while exemptions came to $688 million. By 2009-10, sales tax collections had dropped to less than $2.5 billion while exemptions had leaped fivefold to $3.9 billion.

The Stelly Plan that had eliminated sales taxes on food, drugs and household utilities and replaced them with income taxes was repealed under Jindal. That contributed to a decrease in individual income tax collections from $3.1 billion to $2.2 billion while exemptions more than doubled, from $519,000 to $1.1 billion.

The year-to-year total tax revenue losses from all exemptions are as follows:

$1.07 billion in FY 2004-05; $1.13 billion in FY 2005-06, and $2.55 billion in FY 2006-07.

The projected revenue loss for FY 2007-08 was $2.57 billion and $2.8 billion for FY 2008-09, according to the Department of Revenue report for FY 2006-07, former Gov. Kathleen Blanco’s last year in office.

Instead, the actual revenue lost to exemptions for 2007-08 was $6.7 billion, $4.1 million more than the projections. It was more of the same for 2008-09, when lost revenue was $7.2 billion, more than double the estimate. For FY 2009-10 tax exemptions accounted for revenue losses of $7.1 billion and were projected to drop slightly to $6.68 billion for the fiscal year ended last June 30 and back up slightly to $6.8 by June 30 of this year.

While all these figures admittedly are mind-numbing, it is nevertheless important to know that the five-year (FY 2004-05 through FY 2008-09) loss of revenue to the state treasury comes to $18.7 billion.

The combined unfunded accrued liability (UAL) of the state’s four retirement systems?

$18.3 billion.

by Thomas Aswell, Publisher of Louisiana Voice






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