Wednesday, February 11, 2015

Wednesday, February 11, 2015

Tax credits on the chopping block?; “Payoffs for Layoffs”; College officials want relief from budget cuts; and Group cautions against coastal fund raid

Tax credits on the chopping block?
Gov. Bobby Jindal’s administration is considering a massive overhaul of the way Louisiana administers its tax incentive programs as a way to help plug the $1.6 billion gap between revenues and expenses in the upcoming budget cycle. As Mark Ballard reports in The Advocate:

One idea being considered for the budget would be to take the money from tax credits that are in excess of the amount of taxes owed. For instance, if the credit is $110 but the taxpayer’s liability is $100, then the state would keep the extra $10 rather than refund the amount, she told The Advocate in an interview. Some, but not all, tax credits must be applied against a taxpayers’ tax liability. And some of the tax exemption programs would allow for the possibility of the state taking the excess, Nichols said. Her staff is reviewing the credits to identify those, which could include credits for solar installation, alternative fuels and inventory taxes charged businesses.

If the administration follows through, it could spell doom for the state’s film credit program, as movie producers that film in Louisiana rarely have any state tax liability, meaning their tax credits function as direct subsidies. But it also could also affect programs such as the Earned Income Tax Credit, which puts money back in the pockets of low-income working families.


“Payoffs for Layoffs”
Fox 8 New Orleans continues its investigation into state tax incentives with a look at the state’s  Quality Jobs and Enterprise Zone programs. The Quality Jobs program awards businesses that create new jobs that pay at least $14.50 an hour, which critics say is not enough to warrant a state subsidy. As  Lee Zurik points out, that means a state-subsidized “quality job” pays less than Louisiana’s median hourly wage of $15.03.

Another issue is layoffs after businesses receive their incentive:

When the aluminum producer Ormet re-opened a facility in Ascension Parish, the Commerce and Industry Board approved a $14 million incentive package. In May 2011, Louisiana Economic Development issued a press release; Gov. Jindal called it “a tremendous economic boost.” But 16 months later, the company issued a WARN Act notice. Those notices announce plant closings or massive layoffs. Ormet told the state they would lay off up to 256 people at the plant, its full workforce. The notice of those layoffs came on September 11, 2012. More than a year after announcing the layoffs, Ormet still received a rebate of $1,301,697 for hiring the very employees it laid off.


College officials want relief from budget cuts
Higher education officials are offering suggestions to ease the burden of projected budget cuts in next year’s budget.  As reports, one idea is to scale back some tax exemptions and credits to what they cost when originally implemented.

Higher education leaders are suggesting some of the money included in the growth part of exemptions be transferred to the higher education budget. In other words, Louisiana would be devoting as much money to the exemptions as it did when they first went into place. But now, it would use some of the “growth” area of the exemption to fund the higher education budget.

Meanwhile, The Washington Post’s “Fact Checker” column does a deep dive into the governor’s recent claim that Louisiana’s higher education budget today is “slightly higher” than when he took office in 2008.  The newspaper concludes that Jindal wasn’t exactly telling the truth, and awards him “Three Pinnochios.”

One constant that remains regardless of how the numbers are spun is that the state’s general fund has been cut significantly since Jindal took office. That means since the time Jindal became the state’s top executive, Louisiana has dedicated somewhere between 32 and 48 percent less of its state general fund dollars into its colleges and universities, according to the Louisiana House of Representatives’ Fiscal Division (the non-partisan research arm of the House).


Group cautions against coastal fund raid

The Public Affairs Research Council is counseling the governor against any attempts to take funds from Louisiana’s Coastal Protection and Restoration fund. The Independent notes that Gov. Bobby Jindal and the Legislature have been known for “sweeping” money from funds created for specific purposes to plug holes elsewhere in the state budget, and with a $1.6 billion deficit he will likely be tempted to do so again.

Part of PAR’s argument is that raiding the Coastal Fund would give credence to Uncle Sam’s position that Louisiana and other Gulf states shouldn’t get a larger cut of offshore drilling royalties because they can’t be trusted with the money: “The state’s commitment to disciplined coastal spending could be questioned by Congress, other states, the authorities allocating the various BP settlements, stakeholder groups and the general public,” the group writes in an introduction to the position paper.


Number of the Day

$11 billion – the amount of money Louisiana approved in business incentives from 2008 – 2013.

(Source: Fox 8 New Orleans)