Budget News and Notes

Budget News and Notes

Gov. Bobby Jindal will release his 2012-13 budget plan in less than a week, and that’s when we’ll find out how he proposes to close the $895 million shortfall. But so far it looks like more of the same is on the way: tax breaks for those who need them the least, with higher costs and fewer services for those who need them the most.

By: Jan Moller

Gov. Bobby Jindal will release his 2012-13 budget plan in less than a week, and that’s when we’ll find out how he proposes to close the $895 million shortfall. But so far it looks like more of the same is on the way: tax breaks for those who need them the least, with higher costs and fewer services for those who need them the most.

If you’re a Fortune 500 chief executive, the state wants to pay 25 percent of your moving costs if you agree to put your headquarters to Louisiana. That should help defray the cost of hauling all those Mercedes and BMWs to the Pelican State, though who knows how the CEOs will react when they see our
roads.

The moving cost proposal was among a bushel of new corporate tax breaks that Jindal proposed this week, even as he was deliberately vague about their cost to the state treasury and their effect on employment.

Jindal said he expects the breaks to generate 10,000 “direct and indirect” jobs in the next “five to 10” years, meaning that by the time anyone gets around to calculating whether these tax breaks had any effect on job-creation he will have long since moved on to his next job.

Meanwhile, there is strong evidence to suggest that the tax breaks Jindal is proposing – while doing plenty to lift the governor’s political profile – will have a negligible effect on a company’s decision on where to expand or relocate. Author Greg LeRoy cited longtime site-selection executive Robert Ady in making the case that other factors are far more important than taxes:

“In summary, site selection data do not suggest any correlation between low taxes and positive economic growth, or between high taxes and slow growth. The location requirements are too many, the process too complicated, and other factors too important to justify a strong relationship.

“Ady’s findings are consistent with those of others: tax-rate differences and tax incentives are too small to make a difference. Subsidies cannot make a bad place a good place. Good places are competitive because they have the long-term business basics that a company needs to produce supply to meet demand. So if cities and states want to grow more jobs, instead of cooking up more tax breaks, they should focus on improving their business basics – the valuable inputs and linkages they have.”  

While the exact effect of Jindal’s proposed tax breaks on state revenues is hard to calculate, The (Baton Rouge) Advocate gave it the old college try and came up with $25 million. Coincidentally, that’s almost as much as the Louisiana State University hospital system is being forced to cut to make up the latest mid-year shortfall.

That means if you have a child with complex medical needs, you may soon have to look for another doctor, as LSU is getting ready to close pediatrics clinics throughout the state to cope with a $29 million cut. As Andre Billeaud wrote in a letter to the The Advertiser newspaper in Lafayette, where University Medical Center is looking at closing its pediatric clinic as of March 1:

My family is fortunate to have private health insurance coverage that enables us to travel the nation for the best specialty care available for our son’s conditions. We choose UMC’s Pediatric clinic because it is the best primary care that money can buy for his unique needs, including heart disease, asthma, epilepsy, stroke, feeding tube dependency, developmental delays and attention deficit disorder.

Sadly, health care coverage remains a privilege in this country. We recognize our privilege and the precarious position that we and all parents are in trying to provide health care coverage for our children. We are deeply grateful that UMC is equally accessible to all children with complex medical needs, including HIV, sickle cell anemia, autism, diabetes, regardless of their families’ ability to pay. After all, there, but for the grace of God, go I — or you.

Meanwhile, if you’re a middle-class state employee, your payroll taxes are likely to rise from 8 percent to 11 percent under Jindal’s plans to “reform” the state’s pension system. And if you had planned to retire after 30 years on the job, you may instead have to keep working until age 67.

But the governor, who has his hands full with education issues this session, may first have to convince his hand-picked Retirement Committee chairman that the pension changes are a good idea. Rep. Kevin Pearson, R-Slidell, sounded somewhat skeptical when talking to The Times-Picayune:

Though Pearson, chairman of the House Retirement Committee, volunteered to file the administration’s bills, he said he still has questions about Jindal’s proposal. Among those questions are whether the bills will treat employees equitably and how raising the retirement age could affect existing employees.

“This is the first approach and then we have the whole session to debate the bills,” he said.

Pearson is right, of course. This is only the beginning. We are still a week away from finding out how the governor plans to deal with the fourth straight year of budget shortfalls under his watch. But the early returns are not encouraging.