Job creation policies off base

A new report casts doubt on economic development strategies employed by states like Louisiana that focus on luring out -of-state businesses with tax incentives. The study by the Center on Budget and Policy Priorities found that the vast majority of new jobs are generated when home-grown entrepreneurs and startups thrive and expand. In Louisiana, almost 90 percent of private sector job gains from 1995 – 2013 were start-ups and expanding in-state businesses.

The new data on the dynamics of job creation demonstrate that elected officials’ all-too-common tendency to equate economic development with the state’s ability to attract jobs from other states and prevent business flight is at odds with how state job creation actually occurs.  As discussed above, jobs gained due to firm relocation are such trivial factors in a state’s overall job creation record that they should not be a consideration in formulating state tax policy or economic development policy more broadly.  Likewise, the data cited above on the very small share of jobs resulting from interstate branching implies that focusing on attracting new branch facilities of businesses embedded in industries with little prior presence in the state is likely to provide little job creation bang for the revenue buck given away.

Governor calls for shared sacrifice

In a guest column for Nola.com/The Times Picayune, Gov. John Bel Edwards acknowledges that the menu of revenue raising options he has laid out in response to the current budget crisis is unappealing, but that the alternatives are catastrophic.

I cannot support deep cuts to higher education and the elimination of critical health services that will result if we do not work together to tackle these budget challenges responsibly. Additional cuts would force colleges into financial exigency, lead to hospital closures across the state and prevent the state from delivering basic and critical services to its citizens. … Detractors will spend more time on blame and rhetoric than they will giving solutions. Ask them to name the cuts that will solve the problem and who will suffer if those cuts are imposed. With a wise balance of responsible cuts and revenue-raising, we will emerge stronger together. Washington-style politics have no place in Louisiana. I have asked even my most vocal critics to be solution-driven and compromise-oriented. So, please encourage your legislators to work with me.

The chairman of the House budget committee, Rep. Cameron Henry of Metairie, says he wants the Governor to suggest more budget cuts – including to higher education – before asking the Legislature for new tax revenue. Julia O’Donoghue of  NOLA.com/The Times-Picayune has more.

Without the tax increases, higher education leaders have said some institutions would have to declare financial exigency. Edwards officials have said services for people with disabilities would eliminated suddenly. But Henry told Fox 8 he thought there might be some places where Louisiana’s higher education institutions could save money. He wasn’t necessarily specific about where. Republicans control both branches of the Legislature and are more wary of Edwards’ tax proposals than Democrats. Henry, as head of the House Appropriations Committee, will be one of the legislators who dictates how the governor’s budget proposals and other public policy priorities are received.

A Medicaid card is not a service

Amid the justified excitement about Louisiana’s decision to accept Medicaid coverage expansion, The Advocate’s editorial board reminds its readers that gaining coverage is only the first step in reforming a frayed health care system.

We have supported Medicaid expansion in Louisiana, but it’s clear that expansion is a means to an end, not an end in itself. Fulfilling the program’s goals won’t be easy. A recent story from the Sarasota Herald Tribune about Florida’s Medicaid program should be required reading for Louisiana government and civic leaders.

The story detailed access nightmares for Medicaid recipients, many of whom had trouble finding doctors who would accept Medicaid insurance. As Herald Tribune reporter Maggie Clark told readers, “a developmentally delayed child with AIDS was told to wait six months to see an ear, nose and throat specialist, even though his ears were throbbing and he was screaming in pain. A 3-year-old child with pancreatic disease and chronic tooth decay was dropped from his dentist, who stopped accrediting Medicaid patients. While his mother searched for another dentist, the tooth decay had so diminished the boy’s appetite that he was only drinking milk.”

Low gas prices good for roads

Low prices at the pump is not good news for Louisiana’s budget or for the oil and gas industry, but our roads and bridges benefit. The state’s 20 cents per gallon fuel tax is growing the Louisiana Transportation Trust Fund as motorists drive more. Diana Samuels of Nola.com/The Times Picayune has the story.

Because gasoline prices are so low, people are driving more, officials say. So they’re buying more fuel, and that means a bit more gasoline tax revenue for Louisiana’s backlogged transportation fund. Sen. Page Cortez, R-Lafayette, said at a legislative meeting to discuss transportation projects in the New Orleans area on Tuesday (Feb. 2) that the Transportation Trust Fund may be the “bright area” in Louisiana’s finances. The state’s gasoline tax is 20 cents per gallon. It doesn’t matter whether that gallon costs $1.50 or $3; the state still collects at the same rate. Greg Albrecht, chief economist for the Legislative Fiscal Office, said the fuel tax revenue collected by the state grew 3 percent in fiscal year 2015, which ended June 30. That’s up from 1 percent growth in fiscal 2014, and 1.4 percent growth in fiscal 2013. So far in fiscal 2016, the growth has been about 2 percent. But Albrecht said that includes a down month in December; until then, it had been at 3 percent.

Number of the Day

90 – Percentage of private sector job gains in Louisiana from 1995 – 2013 that were start-ups and expanding in-state businesses. (Source: Center on Budget and Policy Priorities)