Thursday, August 6, 2015

Thursday, August 6, 2015

The challenges of tax reform; Long term care reform delayed; Louisiana students making progress but still trailing nationally; and All grown up and no where to go


The challenges of tax reform
All of the major candidates for governor have said that tax reform will be a top priority. But Jim Beam of the American Press cautions candidates that while reforming the tax code is necessary for Louisiana to improve its budgeting process and  prosper, it will be a tough sell. Beam uses former Governor Buddy Roemer’s attempt as an example:


The Public Affairs Research Council of Louisiana said the tax plan would make the state’s tax structure more progressive by fostering less reliance on the sales tax, which is regressive for the poor, and going up on the income tax for higher income residents. Despite a tremendous selling job by Roemer and many other supporters of the tax plan, it was rejected at the polls by a 55-to-45 percent margin. Opponents who called it simply a huge tax increase succeeded in killing tax reform. Calcasieu Parish and some of the other metropolitan areas approved the plan, but it was rejected in East Baton Rouge, Jefferson and Rapides parishes by wide margins. Despite the frustrations of Roemer and others, everything wasn’t lost. Roemer and governors who succeeded him eventually approved most parts of his tax reform plan one item at a time. The Stelly Plan that swapped sales taxes for higher income taxes is one example. Unfortunately, legislators eventually wiped out the income tax half of that gain six years later. The next governor and members of the new Legislature will find that tax reform is a tough sell. Even so, it has to be done if Louisiana is ever going to improve its state budgeting process and realize its full potential. We wish them well.


Long term care reform delayed
The Jindal administration has decided to kick the can down the road when it comes to reforming long term care.  Marsha Shuler of the advocate reports that Secretary of Health and Hospitals Kathy Kliebert says the decision to let the next administration handle the issue is based on the amount of time contract approval would take. But Shuler also reports that the nursing home industry’s attempt to exempt itself–apparently fearing increased competition–may be to blame for the delay. Most older Louisianans say they want to receive care in their homes, but many are instead forced to move into a nursing home due to long wait lists for in-home care. Advocates are not happy:


“We were deeply disappointed today to learn of the … decision to delay implementation of managed, coordinated long term care, known as Bayou Choices. The reform of Managed Long Term Care has great potential to expand service choices for older adults and their families, to allow more individuals to remain at home and out of costly nursing homes, and achieve real cost savings for the state,” Denise Bottcher, interim state director of Louisiana AARP, said in a statement. Bottcher said the administration’s decision to delay the privatization “could have dire consequences for our state’s older adult population and family caregivers, both of whom desperately need support…We are hopeful that Louisiana’s next governor makes the needs of older adults a top priority by enacting real solutions to ensure people have options other than remaining on a waiting list for services and assistance,” Bottcher said. Bottcher pointed to a recent AARP statewide survey that showed 90 percent of Louisiana voters age 45 and older say home- and community-based services are important to stay in their own home as they age.



Louisiana students making progress but still trailing nationally
Danielle Dreilinger of reports that the number of public school students taking Advanced Placement courses in Louisiana has risen by 150 percent in the last four years and the likelihood of students passing one test has doubled. While Superintendent of education John White acknowledges this as a “remarkable gain”, he also admits that Louisiana will likely remain at the bottom of the list nationally when it comes to AP participation and pass rates when rankings are released. The work to move our students up on that list continues:


The state Board of Elementary and Secondary Education has prioritized Advanced Placement, training hundreds of teachers and paying testing fees for low-income students…But the initiative has not yet spread through the entire state. In 10 of Louisiana’s 70 schools systems, fewer than 10 students took AP exams…In a conference call with reporters, White highlighted the small but growing number of African American students taking and passing the exams. This year, 920 passed, a 30 percent increase from 2013-14. That said, as more students have taken AP exams – not just the elite – pass rates have dropped, to a low of 30 percent of test-takers in 2014. They rebounded slightly in 2014-15 to 31 percent. White said it’s worthwhile to expose students to college-level work even if they are not up to the test. The College Board’s research connects Advanced Placement coursework with higher on-time college graduation rates, even if the student doesn’t pass an exam.


All grown up and no where to go
Young adults living in their parents’ basement became a cultural stereotype during the Great Recession, but Jared Bernstein of the Center for Budget and Policy Priorities says the economic struggles of young adults are very real and having an impact on the national economy. Writing in the Washington Post, he says high levels of student debt and tough credit standards make obtaining a mortgage extremely difficult for young people.


Based on GS [Goldman Sachs] estimates and adding in inertia, the tough job market may explain half of the increase [in children living with parents]…By inertia, I mean that once you’re re-ensconced in your old room with the Madonna posters still on the wall, it probably takes more than a tick down in the jobless rate to blast you outta there. Second, there’s an interesting and important role in these developments for the historically large stock of student debt…a Federal Reserve Bank study, plots the correlation between the increase in student debt among college grads and the increase in “co-residence”—the nice way of saying “kids in the basement.” The fit is moderately solid and their more detailed analysis finds that increased student debt explains as much as a third of the increase in co-residence.


Finally, while high debt levels interacting with tough credit standards may be putting mortgage loans out-of-reach for some of these grown kids, couldn’t they just rent? Well, sure, but…not only are rent-to-median-income ratios historically high, they’re particularly so for younger folks. Moreover, I suspect that increase is driven by both a faster-than-usual rising numerator (rents) and much slower-than-usual growth in the denominator (median income).


All of which translates into slower investment, slower growth, a more sluggish recovery, and probably some unpleasant fights about cleaning up the kitchen. The good news is that the share of kids living at home has plateaued and the residential investment share of GDP is clearly trending up. But it’s been a real slog and I don’t see that changing quickly.


Number of the Day

72,000 – The number of Louisianans receiving long-term care in either institutional or home-based settings (Source: The Advocate)