Monday, May 18, 2015

Monday, May 18, 2015

Business on the defensive; Those costly film subsidies; Four weeks left: where things stand; and Colleges vs. K-12 in pension battle


Business on the defensive

Louisiana’s business community – long accustomed to getting its way at the Legislature – is suddenly on the defensive. Some of their tax breaks are being targeted by legislators who are determined to stop the cuts to higher education and health care. The governor is complaining about “corporate welfare.” At least that’s the word from The Advocate’s Tyler Bridges:


In trying to protect their tax breaks, the business lobbies, led by the Louisiana Association of Business and Industry, are not swayed by arguments that using the money to fund hospitals, universities and other programs would create thousands of jobs and benefit Louisiana’s economy. “The discussion now is to lower (tax) exemptions to fund large government,” said Stephen Waguespack, who is LABI’s president. “The focus has been on raising taxes on business.”


But before anyone starts feeling sorry for the corporate elite, the article reminds us that legislators also are considering doing away with the corporate franchise tax. And then Bridges reminds us that things aren’t so bad in a state with some of the lowest corporate taxes in the land.


A series of numbers explains why lawmakers are targeting business tax breaks this year. One is the conclusion by legislative leaders that they need to raise $1 billion more in tax revenue, along with cutting about $600 million in spending through such measures as not letting state employees’ paychecks keep pace with inflation. Another is that the state gave away nearly $1.1 billion in taxpayer money in 2014 to subsidize six different business activities, as The Advocate reported last year. The incentives subsidize investment in blighted areas, the creation of jobs for low-income workers, producing movies, installing solar energy systems and drilling oil wells. Those same tax breaks cost much less, $200 million, in 2004, the newspaper found. Two more key statistics: Tax collections for the corporate income and franchise taxes totaled $400 million last year, down from a peak of $1 billion in 2008. And of the 87 corporations with the highest revenue in Louisiana in 2012, only 22 of them actually paid corporate income taxes in Louisiana, a study by the state Department of Revenue found.


Those costly film subsidies

As the debate over reining in Louisiana’s film program moves to the Senate (where Rep. Joel Robideaux’s HB 829 will be heard today), the entire country got a look at the global competition among states and countries to attract film productions – and the high cost to taxpayers of subsidizing the (mostly) temporary jobs that Hollywood brings to remote locations. The CBS Sunday Morning news program aired a long feature on “runaway” productions that included a visit to a film shoot in Plaquemine. And it featured a cameo from LBP’s director:


“Every independent study of the film program has shown that it returns pennies on the dollar,” said Jan Moller, director of the Louisiana Budget Project, a watchdog group that claims rewarding the film industry has been a legislative flop. “Any way you do the math, this program doesn’t come close to paying for itself. So what we’re doing, in effect, is paying movie productions to come and shoot in Louisiana.”


“So is there any economic benefit to this, in your view?” asked Cowan.“Well, sure, there’s an economic benefit for the people in the film industry,” replied Moller.


In a state with an estimated $1.6 billion budget shortfall, those are public dollars, he says, not being spent on basic necessities. “Nobody is saying it has to make money for state government,” said Moller. “That’s not the purpose of having a film industry. But I think there is an argument that we shouldn’t be spending money in perpetuity to keep this industry here.” Many Louisiana legislators agree. Last month, several proposals were put forward to cap the amount of money the state spends on film credits. But some worry about limiting the program too much.


Meanwhile, the Public Affairs Research Council entered the fray with a policy brief that calls for unspecified caps to the program, a limit on “above the line” spending on actors’ and producers’ salaries and improved audits.


Four weeks left: where things stand

The legislative session passed its halfway point last week, and The AP’s Melinda Deslatte has a helpful roundup of where everything stands heading into the final four weeks. So far only one bill has made it to the governor’s desk, and the debate over the state budget remains very much in flux.


Despite the side debates, lawmakers insist they remain focused on finances. Behind-the-scenes negotiations continue over the budget to pay for state government and services in the fiscal year that begins July 1. If lawmakers don’t agree on ways to raise new cash, higher education and health care programs could receive hefty cuts. The House agreed to raise $615 million through a cigarette tax hike and scaled-back tax break spending. Senators are looking for more. They’ll consider boosting the effect of the House tax bills in a Monday committee hearing, while the House Appropriations Committee intends Tuesday to consider across-the-board cuts on specially-protected funds, hoping to free up dollars to spend elsewhere.


Colleges vs. K-12 in pension battle

When money is tight in state government, an unfortunate result is a battle over scarce resources. Such is the case in the Teachers Retirement System of Louisiana, where Sen. Robert Adley of Benton is trying to shift $83 million in annual costs from state colleges to local school boards. As Marsha Shuler of The Advocate explains, Adley believes colleges have been footing too much of the cost of paying down debt that built up over many decades.


Under Adley’s proposal, higher education’s contribution would drop from $262.5 million to $179.6 million in the fiscal year that begins July 1, according to an actuarial analysis. At the same time, K-12’s contribution would increase from $900 million to $983 million, the analysis found. The School Boards Association’s Richard said K-12 school systems already have seen a near doubling of their retirement contributions in recent years, with no corresponding increase in state aid to public schools.


Number of the Day

4,200 – Direct jobs supported by the Louisiana film industry in 2014 (Source: PAR)