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President’s View: Knowledge is Power


July 13, 2015

Knowledge is power, but as Albert Einstein once said, “information is not knowledge.”

This week, the Louisiana Association of Business and Industry (LABI) will release its 2015 scorecard for the Louisiana Legislature. The scorecard will be available on LABI’s website at www.labi.org/scorecard and will give Louisiana voters a clear and easy way to see exactly how their legislators voted this session on bills that impacted the private sector economy and Louisiana’s employers. 

In short, the grades are in and they are not very good. This detailed information will be freely accessible for everyone to see and the hope is that it will give each and every voter of this state the information they need to make an informed choice in the fall elections.

Speaking of choice, throughout the regular legislative session, lawmakers repeatedly insisted their only choice to invest in priorities such as higher education and health care was to raise taxes. The reality is there were many other options that could have been placed on the table to do so. The Louisiana Legislature not only failed to structure the tax increases to minimize harm to jobs and the economy, but also refused to control government growth, make reductions in less critical services or even debate structural reforms to the state budget that would allow lawmakers to prioritize needs across state government each and every year.

Quite simply, Louisiana is a tale of two states. In the private sector, multi-billion dollar expansions and developments are underway. There are record-breaking numbers of workers, and the state’s Gross Domestic Product is at an all-time high. On the other hand, in the public sector, Capitol insiders bemoan the fiscal woes of state government even as the state’s budget has swelled from $16 billion in 2004 to more than $24 billion this year.

Just prior to the national recession, Louisiana experienced substantial but temporary growth as a result of a post-Katrina bubble, where federal dollars and a temporary increase in tax revenue related to rebuilding dramatically inflated the state’s budget. 

While the government’s budget certainly decreased from that peak in 2008, it has largely stabilized the past couple of years. Still, the state budget has grown on average almost a billion dollars a year over the past 10 years. 

That unsustainable growth rate must be brought back to reality. 

Our state budget problems are not due to a lack of taxpayer dollars. They are due to a maze of lock boxes and dedicated funds that prohibit existing tax dollars from being eligible for higher education and health care. They are due to a lack of will to address the rising entitlement costs that siphon off millions of dollars every year from the classroom. They are due to overlapping and duplicative bureaucracy and overhead that make our government more expensive than critically necessary to be responsive to our residents.

Rather than address any of these items, lawmakers maintained that their only choice to fund priorities like higher education and healthcare was to raise taxes this legislative session.  The reality is there were many more options available. 

The rhetoric used to justify these tax increases on employers to maintain the operations of state government at current levels often did not match the substance of the bills.

Throughout the session, policy makers regularly opined that “big business” could afford to pay more taxes, frequently using the term “corporate welfare” to define credits and incentives that exist solely to help offset a tax code that is deemed broken and uncompetitive by national and Louisiana experts alike. 

However, the reality is that ALL businesses in Louisiana will be directly affected by the taxes enacted in 2015: multi-national corporations, home-grown Louisiana companies, start-ups and entrepreneurs, and small businesses on every corner in the state. The impact of additional taxes will be felt by employers in every industry sector – petro-chemical, technology and digital media, telecommunications, oil and gas, retail and restaurants, and maritime and ports, among others.

While legislators publicly advocated for a universal “haircut” in their rhetoric throughout the session, the private sector alone was handed the bill and required to pay it. Without question, a traditional Louisiana populist agenda won this session. The budget passed by the 2015 Legislature and signed into law by the governor:

  • Spent more than $600 million in new taxes on critical components of a healthy economy, such as inventory, electricity and research;
  • Made no attempt to address the structural problems in the state budget that have plagued the state for years and is derided by policymakers and experts alike;
  • Maintained the overall size, scope and structure of state government, which is almost $9 billion larger in 2015 than a decade ago;
  • Failed to reform or restructure nationally-high levels of state support for local government, making no reduction whatsoever to these annual subsidies;
  • Utilized no viable analysis of tax credits to focus on those least harmful to the economy and actually ignored existing facts, research and data;
  • Spent millions more on K12 public schools to pay for increasing costs primarily due to entitlements without making any reforms or demands that dollars be prioritized for the classroom;
  • Provided a COLA for state pension recipients (that the governor eventually vetoed) that raised immediate concerns by national rating agencies and directly circumvented pension reforms that were passed just one year earlier; and
  • Made no reductions whatsoever to certain areas of state government, including the legislative budget which received zero cuts and to the judiciary budget, which actually grew this year to account for salary increases for judges.

The fact is that – even before these sizeable tax increases go into effect – tax collections in Louisiana were already projected to increase over the next five years. That tax revenue growth projection, which was due to an expanding economy, is now in question.

Tax policy was not the only area where the Legislature made the choice to prioritize government over private citizens. The House of Representatives refused to take a vote on a bill to end the role of government as the middle-man between taxpayers and public unions, instead allowing the mandate of automatic deduction of union dues to continue across state and local government. A House committee rejected a package of bills to require additional transparency and disclosure by the judicial branch, choosing to keep buried court finances in a state routinely criticized nationally for having a poor legal climate.

On the positive side, legislators voted to protect the Transportation Trust Fund and ensure taxpayer dollars intended for roads are used for that purpose. The Legislature also refused to roll back higher standards for students and rejected new causes of action on employers.

The 2015 regular legislative session represents a pivotal point in Louisiana politics. The Legislature sent a resounding message that maintaining the size and operations of state government was as important – if not more important – than growing jobs and opportunities for citizens in the private sector across this state.

Louisiana cannot afford to repeat the mistakes of the past, where we take an economic boom for granted, only to see hard times quickly follow. At LABI, we do not believe the state can weave in and out of competitiveness, in and out of the path to progress.

This year, the Legislature came up short, and it will be up to a new administration and new Legislature to make 2015 a temporary setback.   That only happens if you make your voice heard this fall.  Information can lead to knowledge and it can be a powerful tool.  Please take the time to do your part.

Alongside our 2,500 member companies around the state, LABI looks forward to working with the 2016 Legislature to fix a fundamentally broken tax code, advance workforce development, improve our legal climate, solve infrastructure needs and limit the role of government in the private sector.