Louisiana Voice

Ninety-five of her fellow House members agreed with Rep. Katrina Jackson (D-Monroe).

Her HB 1104 that would have required state agencies which administer tax credits, exemptions and rebates to report certain information needed by the Legislative Auditor’s Office in determining whether each tax credit, exemption or rebate was “effectuating the purpose they were enacted to achieve” passed 96-0 in the House and by a 35-0 vote in the Senate.

In the end, it appears that Gov. Piyush Jindal had the only vote that counted and he voted no in vetoing the bill, proclaiming that safeguards against abuses were already in place.

Never mind that over the past four years, Louisiana has given away $18 billion in corporate tax exemptions, plus about $300 million per year lost by the repeal of the Stelly Plan.

Almost lost in all of this is an April 25 Legislative Auditor’s report which says in effect that those safeguards Jindal alluded to don’t really work.

The Louisiana Department of Economic Development’s Enterprise Zone program “does not meet the statutory purpose of the program, which is to stimulate business and industrial growth in enterprise zones,” the 17-page audit report says.

The state’s EZ, program is a jobs incentive program that provides Louisiana income and franchise tax credits to businesses hiring at least 35 percent of net, new jobs from one of four targeted groups:

• Residency;

• New employees who heretofore were receiving some form of public assistance;

• New employees below the ninth grade proficiency in reading, writing or math;

• New employees who are unemployable by traditional standards.

Enterprise zones are areas with high unemployment, low income or a high percentage of residents receiving some form of public assistance. A business must create permanent net, new jobs at the EZ site.

Such jobs must be created upon the start date of the project or of construction and either increase current workforce by 10 percent within the first 12 months or create a minimum of five net, new jobs within the first 24 months.

When the state’s Enterprise Zone, or EZ, program was created in 1981, it was designated to stimulate growth in enterprise zones by providing tax incentives to businesses that locate to and operate in those areas. Act 977 of 1999, however, eliminated the requirement that businesses must locate to or operate in an enterprise zone to qualify for EZ incentives, the report noted.

Benefits to the employer include the following:
• A one-time $2,500 credit per new job;

• Rebates of 4 percent of sales taxes on materials, machinery, furniture or equipment;

• The earning of a 1.5 percent refundable investment tax credit.

Businesses may receive EZ incentives for creating part-time jobs, jobs that provide a smaller economic impact and which provide no employee benefits such as health care or retirement plans. This means a business creating a single 20-hour part-time minimum wage ($7.25 per hour) job with an economic impact of $7,450 receives the same EZ incentive as a business creating a single 35-hour full-time minimum wage job with an economic impact of $13,195, plus benefits, the report said.

Moreover, a business is not even required to be located in an EZ and does not have to invest money—only create additional jobs—to qualify.

Louisiana also approves retail businesses, where jobs easily transfer or shift from one business to another with no real gain in the number of jobs, to receive EZ program incentives.

Finally, Louisiana law prohibits the disclosure of the amount of incentives received by businesses and in so doing, denies the public of its right to know how its tax money is spent.

The audit says that during calendar years 2008 (Jindal’s first year in office) through 2010:

• 632 of 930 businesses (68 percent) receiving EZ program incentives were located outside a designated enterprise zone;

• Those 632 businesses received approximately 123.9 million (61 percent) of the $203.1 million in total EZ program incentives granted;

• Approximately $3.9 billion (60 percent) of the $6.5 billion in capital investment by the 930 businesses receiving incentives was located outside a designated EZ;

• Approximately 12,570 (75 percent) of the 16,760 net new jobs created by the 930 businesses were located outside an EZ.

The number and dollar amounts of EZ incentives have increased dramatically since Jindal took office in January of 2008. In 2007, the year before he took office, there were $25.4 million in EZ program incentives approved. In his first two years in office, 2008 and 2009, the amount was about $60 million for each year and in 2010, the amount jumped to $109.6 million, according to information provided by the Louisiana Department of Revenue.

The Department of Revenue could only provide date by fiscal year whereas all other data were from calendar years, thus the difference between the $229.8 million reported by Revenue for the three years of 2008-2010 as opposed to the $203.1 million reported by the Louisiana Department of Economic Development.

Using Revenue’s numbers, the $229.8 million approved during Jindal’s first three years in office eclipsed the previous seven fiscal years’ combined total of $202 million.

“We also determined how Louisiana’s EZ program differs from those in other competing neighboring states—Alabama, Arkansas, Mississippi and Texas,” the audit report said.

Some of the differences included:

• Alabama and Mississippi require businesses to be located in an enterprise zone in order to receive EZ program incentives;

• All four neighboring states exclude retail industries from EZ incentive program qualification;

• None of the four allows businesses to include part-time employees;

• Alabama, Arkansas and Texas require companies to prove the creation of net new jobs before receiving any EZ program incentives. In Louisiana, businesses have up to two years to create the required minimum number of net new jobs;

• Texas requires that the names of businesses that participate in its EZ program and the amounts of incentives each business receives be made public. Louisiana law prohibits the disclosure of the amount of incentives received by each business.

The report suggested that these shortcomings be remedied by corrective legislation.

That, in essence, is what Rep. Jackson attempted to do with her HB 1004 that was approved unanimously in both chambers.

But Gov. Piyush Jindal would have none of it.