Exxon-Mobil last week began operations at its polyolefins plant in Baton Rouge, which just underwent a $500 million expansion that was partially underwritten by the state’s generous tax-forgiveness program for manufacturers. When Gov. John Bel Edwards reformed the Industrial Tax Exemption Program in 2016 to make it slightly less generous – and to give local authorities control over their property tax revenue – it drew howls from corporate leaders. But Exxon-Mobil’s expansion is more proof that the reforms are working – and should serve as a lesson to gubernatorial candidates who might be tempted to revert to the old status quo by reversing Edwards’ executive order. The Advocate elaborates in an editorial:. 

The power of local governments to approve the agreements was also new: Previously, a state board rubber-stamped just about every tax exemption request. Local governments got some revenues from construction work and purchases but had to wait until ten years on for the big bucks, when major plants would come on to the property tax rolls. Giving away other people’s money — local property taxes — was a sweet deal for the state. Governors and legislators could claim political credit for “economic development.” … Industry may well want a better deal — and a new governor could give it to them with the proverbial stroke of a pen.

Infrastructure law will help state’s water woes
Earlier this month the Louisiana health department released mix results on the state’s water systems. While the majority of grades were good – 776 out of 954 water systems, covering nearly 4 million people, earned an A or a B grade, more than 450,000 residents are served by water systems that received a D or F. U.S. Sen. Bill Cassidy, writing a guest column for Nola.com, explains how the new federal infrastructure law, which he took a leading part in crafting, is addressing these challenges. 

Last year, Louisiana received $101 million for its Clean Water State Revolving Fund and Drinking Water State Revolving Fund programs from IIJA, and the state will continue to collect these increased funds for five years. These funds provide low-interest financing for water systems and community projects to accelerate water infrastructure improvements. This is good news. These funds will be instrumental for many of the water systems that did not meet muster. Improved water, sewer and drainage will revitalize communities. They will create better places for families to live and long-term economic growth across Louisiana. And most importantly, they will give families peace of mind when they turn on the tap.

Colleges prepare for enrollment cliff
The financial hardships of the Great Recession caused the nation’s birthrate to plunge in 2008 and remain flat in the subsequent years. Now colleges and universities are facing an “enrollment cliff” in 2026 because of the lack of students who would have enrolled when they turned 18. The Advocate’s Ken Stickney reports:

Louisiana is projected to lose 7.5% to 15% of its enrollment in college-age students. Arkansas and Mississippi are expected to lose more than 15%, according to Nathan Grawe, of Carleton College, who has been studying the demographic trends for many years. Jim Henderson, president of the nine-institution University of Louisiana System, has been hearing that dire prediction for years. Laments heard here echo those found in many corners of the country. “2025 is the peak year,” Henderson said, “then the numbers drop off sharply in 2026.”

This enrollment dip is extremely concerning for Louisiana because it funds much of its higher education system on the backs of students and families via tuition increases and fees. With fewer “traditional” students in the pipeline, colleges and universities are being forced to look elsewhere to make up for the coming shortfall.

Henderson said this week that UL system schools are instead turning their attention to a new market for potential students: older, nontraditional learners with some college credits, though too few for a degree or credentials. He said the system has been eying those potential students — up to 653,000 in Louisiana — since before the pandemic through the Compete Louisiana program, which offers degree opportunities to those potential enrollees if they return to UL system schools. “In Louisiana, we will see a drop-off in high school graduates. But so many adult, nontraditional students will need services from regional universities,” Henderson said.

Inflation could stress state budget
Rising costs due to inflation are disrupting state finances and have the
potential to exacerbate many long-term fiscal risks. While inflation has
recently slowed, it’s not predicted to return to normal levels anytime soon, and efforts by the Federal Reserve to tame rising costs could lead to a recession. Pew’s Justin Theal and Sheanna Gomes explain how inflation could increase fiscal stress for states: 

Although a temporary spike in inflation can boost sales tax revenue, persistently high inflation has historically led to decreased consumer and business spending and, as a result, weaker collections. Should persistent inflation and actions aimed at taming it trigger a recession, spending and related sales tax revenue would decline even further. Personal income taxes are collected on many types of income, and how much each state relies on individual sources influences how rising costs affect overall collections. For example, state taxes on wages and salaries make up the lion’s share and tend to grow faster during periods of elevated inflation as employers look to increase worker pay to help compensate for the rising costs of living. 

Number of the Day
35 – Louisiana’s national rank for the annual UHaul Growth Index, which analyzes the net gain of one-way trucks arriving and leaving each state. While Louisiana ranked as one of the lowest growth states, it’s the first time it didn’t see a net loss since 2016. (Source: UHaul via The Advocate)