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Hear the Echoes #11 - Friday, April 1, 2011

Hear the Echoes #11



       Read my lips

No New Taxes for Louisiana!



Governor Bobby Jindal fiercely proclaims that there will be no new taxes in Louisiana.  He proclaims that citizens already pay sufficiently for government and that agencies, including school boards, must learn a harsh lesson in how to do more with less.

School districts, of course, must be getting accustomed to that challenge for they have had less revenue for the past two years, more state costs shifted down to them, and forever increasing raising of the bar for student achievement that often raises costs.

This winter’s LSU Manship School of Mass Communications survey showed that 41.1% of survey respondents believe the state is headed in the right direction, which is down seven points from the 2010 response; and almost 10 percent down from Gov. Jindal’s first year in office. 

Forty-six percent of Louisiana residents favor filling the projected state budget short-fall by some combination of spending cuts and tax increases.

The LSU survey reported that 59% of respondents support a temporary reinstatement of the Stelly Tax Plan that was repealed when Jindal became governor.  Sixty-one percent would support income tax increases tied to higher education.

It would appear that citizens are concerned that the cut only strategy to which Gov. Jindal is committed will conflict with his oft-stated objective to improve the state’s economy.  The Governor’s position was questioned, early this year, by Sen. Ben Nevers who chose to refer to education spending as an important investment in the state’s economic future.

A non-profit group, Better Choices for a Better Louisiana, presented last week to the Louisiana School Boards Association board of directors.  It suggested that the governor’s strategy for cutting the $25.5 billion budget is seriously flawed in that only $2.6 billion is contained in the discretionary budget.  The remainder of the budget is restricted.  Higher education with 34% of that discretionary budget and health care with 37% are being tagged hardest in the cutting.

The organization suggested to the LSBA board that a better strategy for righting the state budget problem would be to evaluate the loopholes that encourage certain groups to avoid paying taxes that others pay.  Louisiana "spends” $7.1 billion annually on tax exemptions.

The group advocates halting new tax exemptions until the fiscal crisis has passed, but in the meanwhile mounting a careful evaluation of the 400 existing exemptions to determine if they are really necessary.

Underlying the entire issue of the purported state budgetary crisis is the issue of program need versus ability to pay.

The Tax Foundation, a Washington D.C. non-profit that advocates for lower taxation, issued a report that shows no state in the nation had an earlier tax freedom day in 2010 than did Louisiana.  The organization study of state taxation revealed that by March 26th 2010 Louisiana citizens had earned enough to pay all federal, state and local taxes for the year.

The report showed that the state and local tax burden per capita in 2009 ranked Louisiana 43rd lowest in the nation with $3,037.  Texas ranked 39th at $3,197; Mississippi 50th at $2,678; and Alabama 47th at $2,967.

Foundation analysts found that in 2009 Louisiana ranked 34th in per capita income with an average of $37,109 per capita.  Mississippi per capita income was $30,689, Arkansas $33,238, and Texas $40,498.

The state and local tax burden as a percentage of state income for Louisiana citizens amounted to 8.2% which placed Louisiana 42nd among the 50 states.  Louisiana collected per capita state taxes of $2,240, ranking it 29th nationally.

In 2008, property tax as a percentage of total state and local tax revenue amounted to 15.58%, the fourth lowest in the nation with only Alaska, Arkansas, and New Mexico lower.

Sales tax revenue accounted for 39.6% of total state and local tax revenue.  The state shared the distinction with Arizona as charging the highest percentage of state and local sales tax.  As of January 1, 2011, Louisiana ranked fourth highest in the nation in combined state and local tax rates but 38th in state sales tax rate.  State general sales tax collections per capita for 2009 amounted to $663 ranking the state 30th in the nation. 

Thirteen states had lower income taxes than Louisiana’s 17.7% of total state and local tax collections.  In 2009, Louisiana tax payers individual income tax collections amounted to $658 ranking the state 34th in the nation. 

Twenty-six states had lower corporate income taxes with Louisiana collecting 3.9% of its total state and local tax burden from that source.

Louisiana ranked 38th as of January 1, 2011 in state gasoline tax rates; 48th in state cigarette excise taxation;  40th in state spirits excise tax rate; 14th in beer excise tax rates; and 44th in state and local cell phone tax rates.

Property taxes on owner-occupied housing as a percentage of median home value in 2009 amounted to an average rate of 0.18% in Louisiana and that ranked Louisiana’s effective rate lowest in the nation.  The next lowest effective tax rate was in Hawaii at 0.26%, while neighboring state rates were Mississippi 0.52%, Arkansas 0.52% and Texas 1.81%.

In an important measure of state debt per capita, Louisiana citizens shouldered, in 2009, $3,107 each ranking Louisiana 17th highest in the nation.  This was a change from 2008 when per capita state debt amounted to $7,224 but ranked 27th.

            In an earlier Hear the Echoes (#9 published March 16th) evidence was presented that the budget estimates that yield chaotic conclusions for state program outlooks are suspect.

            The Legislative Fiscal Office’s own website reveals that in 16 of 19 years its pre-legislative session evaluation of Revenue Estimate Conference projections errs by underestimating revenues by an average of 7.7%.   Each percentage point in under-estimated revenue the fiscal office reports is worth $96 million and that equates to as much as $739 million of the purported shortfall.

            Louisiana’s education stakeholders are facing harsh demands to accelerate improvements in student achievement.  The advent of new school performance scoring, and new common core standards couple with an entirely new value-added testing regime are expected to elevate costs of K-12 education added to the de-facto budget cuts of the last two years, and the one proposed for 2011-12 will be devastating.

            Parents, students, faculties and all other stakeholders, including the small business community that craves higher performing graduates should look with alarm at what has been policy in the current administration. 

            Superintendent Paul Pastorek’s dedication to conversion of as many K-12 public schools as he can to charters has, to this point, revealed a significantly higher cost for operating the charters than traditionally managed public schools.  Nowhere is there a fiscal strategy to meet this hijacking of public school funding.


Don Whittinghill

LSBA Consultant



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