Tools for sustainable state budgeting

Tools for sustainable state budgeting

Gov. Jeff Landry will present his budget recommendations to the Legislature on Thursday afternoon. The governor has already issued an executive order directing state agencies to implement austerity measures in preparation for a decline in state revenue. A recent report from the Pew Charitable Trusts explains why states should use long-term budget assessments and multiyear stress tests to promote fiscal resilience:

Policymakers understand that their states will need to provide schools, roads, prisons, and health insurance indefinitely, and by measuring the risk of future budget imbalances, long-term assessments and stress tests can help them anticipate whether the state will have the capacity to do so. … In this way, long-term assessments and stress tests offer warnings when a state’s budget is on an unsustainable trajectory—allowing policymakers to adjust before problems become severe. But they are just as valuable when they deliver good news, because they show when states can afford new investments without threatening long-term fiscal health.

Louisiana implements long-term budget assessments through forecasts from the Revenue Estimating Conference, but does not utilize multiyear stress tests.  


The real path to prosperity
Gov. Jeff Landry’s transition advisors have recommended doing away with state income taxes on individuals and corporations – a tall task given that those taxes constitute roughly one-third of the state tax base. Kurt Kiesling of Gonzales worked for years in manufacturing and says that scrapping the income tax won’t be the magical elixir for jobs and investment that its supporters believe. Quite the opposite, he writes in a letter to The Advocate

In my nearly 40 years working for a major manufacturing company, I was personally involved in evaluating where to locate or acquire new manufacturing capacity on four occasions. In none of those evaluations did the subject of personal income tax have any bearing on decisions. Corporate income tax was also a nonissue as our facilities were capital intensive and property taxes were more influential. The key economic driver was logistics costs both in obtaining raw materials and delivering product to customers. Infrastructure and labor force quality were sometimes deciding factors.

If state leaders really want to make Louisiana more attractive to business, they should focus on reducing poverty and improving quality of life. 

If anything, higher taxes usually corresponded to higher quality of life, better infrastructure and better education opportunities for families that relocate to support new business. Since the committee making these recommendations has not addressed where offsetting revenue will come from, it is almost certain that Louisiana will be even less attractive to new business.


No changes on paid parental leave
Gov. Jeff Landry’s administration confirmed earlier this week that it has not made any changes to a new paid parental leave policy enacted by his predecessor. A new state Civil Service rule and an executive order by Gov. John Bel Edwards provides six weeks of paid parental leave for approximately 70,000 state employees. While Landry does not have the ability to undo the Civil Service Rule, he could nix Edwards’ executive order at any time. The Louisiana Illuminator’s Julie O’Donoghue reports:

The parental leave policy for unclassified workers will automatically lapse in early August if Landry’s doesn’t issue his own executive order to extend the benefit. State law dictates orders issued by Edwards, as the former governor, expire 60 days after the 2024 regular session that ends June 3. The current parental leave policy also hasn’t been extended across the state government. It doesn’t automatically apply to people who work for the Louisiana Legislature, public universities or the state courts.LSU, for example, has not extended paid parental leave to all of its employees, despite promising to do so late last year.

O’Donoghue lays out three paths Landry can take on paid parental leave for unclassified employees. The Illuminator’s Piper Hutchinson reports that the Louisiana Community and Technical College System Board of Supervisors has adopted a new policy that provides six weeks of fully paid parental leave to all employees.


America is neglecting its kids
Children in the United States are more likely to go hungry, live in poverty and die than their counterparts in most of our peer countries. In Louisiana, 1 in 4 kids live in poverty. Even a historic policy achievement – an expanded version of the federal Child Tax Credit that cut the nation’s child poverty rate in half – was simply allowed to expire by Congressional lawmakers. The New York Times’ Nicholas Kristof chastises America for neglecting its children and provides ways we can do better: 

An early child care program modeled after the one that exists in the United States military. If our armed forces can operate a child care program with fees based on ability to pay, then the rest of the country can as well. A government-supported early childhood program rescues parents and kids alike. … An expanded refundable child tax credit to cut child poverty. Most other wealthy countries have introduced a monthly child allowance to lift children out of poverty, and the United States followed in 2021 with the refundable child tax credit. 


Number of the Day
$1.13 trillion – Americans’ collective credit card balance for the last quarter of 2023, a record high. (Source: Federal Reserve Bank of New York’s Center for Microeconomic Data via the Washington Post)