Feeds:
Posts
Comments

Archive for the ‘Economy’ Category

A layman’s simplistic approach to taxation (Installment One)

Posted in Budget, Economy, Golf Courses, Governor's Office, House, Senate, Legislature, Legislators, Revenue, Taxes on January 1, 2011| 2 Comments »

During the 1988 presidential race, Vice President George H.W. Bush proclaimed, “Read my lips: no new taxes!”

That famous line helped him defeat Michael Dukakis but when he was forced to back-track on that promise, it was his eventual undoing. Bill Clinton’s own pithy campaign slogan “It’s the economy, stupid” swept the Arkansas governor into the White House in 1992.

Now, 19 years later, Louisiana’s Governor seems determined not to repeat Bush’s mistake. Bobby Jindal doggedly clings to his stated refusal to consider new taxes—or even to reinstate repealed taxes—to help lift the state out of its current financial morass.

Ironically, his stubbornness to keep that promise could conceivably cause him problems in his own re-election bid if he and the legislature cannot work together find some alternate means of achieving financial solvency for the state.

The state will be facing a budgetary shortfall estimated at $1.6 billion when legislators convene at noon on April 25. They will have less than two months to come up with a way to keep the state afloat.

The crux of the problem is lawmakers’ propensity to spend one-time revenue on recurring expenses with no long-term plan for addressing future needs. Jindal has tossed out a plan to sell off state assets, including state buildings and two state-run prisons, but that would be a temporary Band-Aid at best. Likewise, his tentative proposal to draw against future State Lottery revenues would seem to be a desperation ploy that would do nothing to address fiscal problems in ensuing years.

Jindal’s reluctance to use the line-item veto to kill more than $500 million in spending on local projects like golf courses, councils on aging, baseball parks, tennis courts, court houses, and community centers, has done little to assuage the situation and in fact, makes him complicit in perpertrating the state’s current dilemma.

So, just where does that leave the state?

In a word, broke.

So, what are the alternatives?

How about hefty increases in the state’s tobacco tax?

How about comparable increases in alcohol taxes?

Together, they’re commonly referred to as sin taxes.

Louisiana currently taxes cigarettes at a rate of 36 cents per pack, which ranks 48th among the 50 states and 51st overall, when Guam ($3 per pack), District of Columbia ($2.50 per pack), and Puerto Rico ($2.23 per pack) are factored into the equation.

The national average is 99 cents per pack.

Only Virginia, a tobacco state, and Missouri tax cigarettes at a lower rate at 30 and 17 cents per pack, respectively. Even North Carolina, another tobacco producing state, taxes cigarettes at 45 cents per pack. South Carolina, likewise a big tobacco producer, held its cigarette tax down to a paltry 7 cents per pack until July 1, 2010, when it was raised to 57 cents.

New York, which until July 1, 2010, taxed cigarettes at $2.75 per pack, now has the highest rate in the nation at $4.35 per pack. But over-taxing any commodity can have adverse effects. Enterprising bootleggers need only go across the state line to Connecticut ($3 per pack) New Jersey ($2.70), New Hampshire ($1.78), or Pennsylvania ($1.60), return to New York, and sell them on the black market, thus depriving the state of untold millions of dollars.

Likewise, if Louisiana gets too greedy, a new, prohibitive tax of say, $1.50 per pack, might well drive Louisianians into Mississippi where the current tax is 68 cents per pack. But a tax of that amount would put the state on virtual equal footing with Texas, which imposes a tax of $1.41 per pack.

But just for the sake of argument, let’s say the legislature does man-up in this, an election year, and increase the tobacco tax to $1 per pack. What would that mean in terms of revenue, assuming the increase would not cause a corresponding decrease in the number of smokers and that citizens would not traverse the state line into Mississippi in search of cheaper smokes?

During the fiscal year 2008-2009, the last year for which figures are available, Louisiana collected almost $147.2 million in tobacco taxes, the third straight year of increases. At $1 per pack, the state would conceivably reap $407.2 million, a 176.6 percent increase. A tax of $1.50 per pack would kick that amount up to $613.3 million, barring a reduction in sales.

The Institute on Taxation and Economic Policy calls tobacco taxes both “regressive” and “declining”—regressive in that low-income smokers are the most adversely impacted, and declining because, it says, cigarette taxes are among the slowest-growing revenue sources available.

In 2006, the institute said in its 2007 policy brief, the state’s poorest smokers spent .6 percent of their income on cigarette taxes, 10 times the .06 percent spent by the wealthiest Louisiana smokers. Moreover, low-income Louisianans are more likely to smoke than higher-income taxpayers, the report said.

The same report said the state’s 36-cent-per-pack tax income will be static because the tax is not based on the retail price of cigarettes where tax revenues increase with price increases. Oddly, all 50 states have flat-rate cigarette taxes as opposed to basing them on a percentage of retail prices.

Another factor in the declining tax theory is the decrease in sales when cigarette taxes are increased. In fact, cigarette consumption by Louisianans has declined steadily over the past quarter-century, the report shows.

From a high of more than 600 million packs sold (about 132 packs per person) in 1982, sales plummeted to 410 million packs (91 packs per person) by 2005.

An increase in tobacco taxes, then, could serve as a double-edged sword: on the one hand, it might not produce a significant increase in revenue, but if it resulted in fewer people lighting up, the health benefits derived from the tax increase could be immeasurable with a lessening of the financial strain on the state’s charity hospitals.

Alcohol could be quite another story. Of the 50 states, Guam, Puerto Rico, and Washington D.C. only 12 have higher taxes on beer than Louisiana. On the other hand, only five of the 53 have lower taxes on liquor. Like tobacco, however, alcohol is taxed on the amount sold as opposed to basing the tax on a percentage of the retail price.

The Louisiana Department of Revenue reports that for Fiscal Year 2008-09, the state collected nearly $56.9 million in alcohol tax. The breakdown was $37.3 million on low-alcohol content (beer) and almost $19.6 million on high-alcohol (liquor) sales. Should the legislature decide to raise Louisiana’s liquor tax to the national average of $6.25 per gallon, it could mean an income of $49 million—more than double the present amount.

The solution, then, insofar as the state’s sin taxes are concerned, could be found not so much in an increase (though a modest increase in both tobacco and liquor taxes might well be in order) as a change to a rate based on the retail cost.

More simplistic revenue-producing suggestions from a non-CPA, non-financial analyst, layman perspective will follow in subsequent posts.

Read Full Post »

Jindal: Mastering the art of doing less with more

Posted in Economy, Governor's Office, Jobs, Layoffs, Transparency on November 21, 2010| Leave a Comment »

Gov. Bobby Jindal’s office has announced that one of his top aides is leaving to pursue work in the private sector. The announcement immediately prompted two observations.

First, how is it, when thousands of Louisianians are out of work and unable to find jobs, Camille Conaway can simply walk away from a $110,000-per-year position—notice I said position, not job—and find work in the private sector? When hundreds of rank-and-file state employees are being laid off as the Christmas season approaches, it seems odd that she can jump to the head of the line—unless she has connections. Of course, we know no one from the governor’s office would intercede in her behalf while turning their backs on long-time dedicated civil service employees. Would they?

Well, why not? If it was good enough for former Commissioner of Administration Angelé Davis, why not, indeed.

Second, her departure gives the governor in absentia the perfect opportunity to lead by example.

If Jindal really wanted to make an impression (other than taking a helicopter to some remote protestant church in north Louisiana to give out federal stimulus money that he is against accepting on principle), then he would simply leave the position open, saving the state treasury that $110,000.

If he were really sincere about “doing more with less,” as he insists state agencies and state colleges and universities do, he would hold a press conference and, in his rapid-fire style of delivery say something like this:

“Three things: One, we are losing one of the administration’s top people. Two, we hate to see her go but after taking a close and critical look at my office, I have decided that I can do more with less. Three, the dozens of overpaid deadheads who remain are just gonna have to suck it up and do more work. They may, of course, be required to spend less time on Facebook but whatever it takes, we can, and will, do.”

That’s what he should have said. But that, unfortunately, is not what he did say.

In fact, he didn’t say anything. He left it to public relations flunky Kyle Plotkin.

Plotkin, in case you didn’t know, is from New Jersey. (Obviously, Jindal, who openly bemoans the exodus of Louisiana’s best and brightest to other states, was unable to find even one person from Louisiana who was qualified to grind out press releases.) Plotkin worked in various capacities for former Massachusetts Gov. Mitt Romney, which or course makes him eminently qualified to do what no one from this state is capable of doing: paying lip service to policy decisions by the Louisiana governor/wunderkind/frequent flyer/wannabe best-seller author who knows what’s best for America but not necessarily for Louisiana. Speaking of which, how can Jindal call himself an author when his book was ghost written (meaning he didn’t write a complete sentence of his own memoir that he dares to call Leadership and Crisis)?

But as usual, I digress.

Conaway, Plotkin said, was primarily responsible for developing Jindal’s legislative package and also worked with legislators. One has to wonder: Might part of the legislative package she developed have been stripping the State Board of Ethics of its power? Okay, that’s a rhetorical question and again, I’m off-point.

Plotkin went on to say that Conaway will be replaced by Michael Dailey, who served as (get this) deputy secretary of programs at the state Department of Children and Family Services. Deputy secretary of programs? What in the name of all that’s holy would that entail? What programs? Deputy secretary of programs sounds awfully Barney Fifeish.

Nevertheless, Dailey will pull down the same $110,000 salary as his predecessor, Plotkin said.

So much for leading by example. So much for doing more with less.

Can’t wait for your next book, Guv: How to Run A Shell Game With Only One Shell.

Read Full Post »

Jindal: State economy is great but layoffs coming: Merry Christmas

Posted in Civil Service, Economy, Ethics, Governor's Office, Layoffs, Uncategorized on November 11, 2010| 1 Comment »

Even as Gov. Bobby Jindal insists that Louisiana’s economy is improving, another round of state layoffs, this one in the Division of Administration, has been announced in Baton Rouge. Scheduled to take effect only two weeks after Christmas, the latest round will impact positions in the Office of Information Technology, Office of Information Services, Office of Computing Services, and Office of Telecommunications Management.

The announcement was made by a Nov. 5 e-mail from Commissioner of Administration Paul Rainwater through appointing authority Steven Procopio and was sent to managers and supervisors in the Division of Administration. It was the second e-mail notification of layoffs to state employees. Two weeks ago, employees of the Department of Health and Hospitals received similar notification. DHH layoffs, like those in the DOA, are scheduled for early January.

The latest email was sent to department heads with instructions to distribute copies of the notice to employees by e-mail and to post copies on office bulletin boards. It contained the disclaimer that the message was “only for the specified individual or organization,” and that any unauthorized dissemination or copying of the e-mail “is strictly prohibited.”

“These layoffs are being proposed due to $4.1 million in budget cuts facing the Division of Administration and the need for cost savings for Fiscal Year 2010-2011,” it said.

The state is presently facing a budget deficit of $106 million for the current fiscal year and projections are for a $1.6 billion shortfall for FY 2011-2012, according to Jindal.

Jindal announced last month that as many as one-third of the Louisiana Board of Ethics staff would be laid off in efforts to draw down the current budget deficit. On Nov. 4 Jindal said on his web blog that Louisiana had one of the top 10 business climates in the nation and that Louisiana “was the most improved state in the country.” He said his Department of Economic Development “has certainly been able to do more with less.”

Read Full Post »

College mergers: the elephant in the room

Posted in Budget, Economy, Governor's Office, Higher Education, Regents on November 11, 2010| 2 Comments »

Perhaps, at long last, the time has come to talk about the elephant in the room.

Up to now, timid lawmakers have only dared whisper of the possibility of closing Louisiana’s two predominantly black universities and merging them with larger, mostly white schools. But now perhaps more serious, yes, even bolder consideration should be given not only to closing Grambling and Southern universities, but perhaps a few others four-year colleges in Louisiana as well.

Letter writers and bloggers have broached the subject more frequently as of late as the state’s economic plight worsens but as yet no member of the legislature, the Louisiana Board of Regents, nor the University of Louisiana System’s Board of Supervisors has summoned the political courage to address the issue.

Nor has Gov. Jindal or anyone else on the fourth floor of the State Capitol dared suggest what should be the obvious solution to erasing a substantial portion, if not all, of the state budget deficit.

The existence of three four-year public universities within 40-50 miles of each other, though a benign issue in better times, has suddenly become a topic that must finally be addressed in the interest of fiscal responsibility.

In north Louisiana, the University of Louisiana-Monroe (ULM), Louisiana Tech, and Grambling State universities are situated only about 40 miles apart on I-20.

In south Louisiana, Southeastern Louisiana University, LSU, and Southern University are in relative proximity to each other with Southern and LSU both in Baton Rouge and Southeastern only about 45 miles away in Hammond.

In the central part of the state, LSU-Eunice and LSU-Alexandria are a mere 50 miles apart. Granted, LSU-Eunice is a junior college, but does that justify the existence of two public institutions of higher learning so near each other serving essentially the same constituency?

For that matter, is there really a need for the University of New Orleans and Southern University-New Orleans to be located in the same city with Nicholls State less than 50 miles away in Thibodaux?

Three junior colleges, Bossier Community College, Southern University-Shreveport, and LSU-Shreveport sit within shouting distance from one another in the adjacent parishes of Caddo and Bossier.

That many junior colleges and four-year universities as close to each other as these schools do not represent the wisest investment of taxpayer dollars. When the state was flush with oil and gas money, it didn’t seem to matter. Political expediency was the order of the day and every part of the state wanted its own four-year school.

But that was before the existence of today’s $106 million state budget deficit. The combined budgets of ULM and Grambling were $126.3 million in 2009-2010 and the combined proposed budgets of the two schools for 2010-2011 approach $135 million. Add Northwestern to the mix and the numbers jump to $198.1 million and $210.3 million, respectively. Throw in the three junior colleges in the Shreveport area and, well, you get the picture. Strategic mergers in north Louisiana alone could wipe out the state’s budget deficit.

Merging two or more of the institutions would not produce an automatic savings equal to the combined budget of one or more of the schools being phased out because one school would have to absorb many of the displaced students, professors, and instructors.

But the elimination of athletic programs, (coaches’ salaries, athletic scholarships, and facility upkeep), administrative fees, including salaries for university presidents, the various vice presidents, deans, assistant deans, department heads, etc., by reducing the number of four-year institutions from the dozen we now have to only three or four would result in slashing expenditures by perhaps as much as several hundred million dollars.

Athletic programs and college administrations are not the only duplications that could be eliminated by a well-planned merger of universities. Curricula at many schools are nearly identical and replication could be eliminated in these areas as well. While some schools specialize in certain degree programs—the pharmacy program at ULM comes to mind—there is considerable overlap in curricula from school to school with many of those schools only a few miles from each other. The two existing law schools at LSU and Southern, for example, are located less than 10 miles from each other in Baton Rouge.

Why has this issue not been addressed by the powers that be? The answer is simple. Louisiana’s black political leaders and educators understandably want to protect their heritage at all cost and a big part of that heritage is represented by the two predominant black universities, Southern and Grambling and Southern’s Shreveport and New Orleans campuses. To close the black schools is to flirt with political disaster. The issue is an emotional powder keg that no one wants to ignite.

Even in cities like Lake Charles, Thibodaux, Alexandria, and Hammond, where the issue is not one of black heritage, the local political leaders, chambers of commerce, and legislators will do all in their power to retain their four-year institutions as part of their own identity. They would never agree to turning Nicholls, Northwestern, McNeese, UNO, LSU-A, or Southeastern into junior colleges. Most of those have already been there and they don’t want to go back.

Nor would they be likely to agree to merge Bossier Community College, Southern-Shreveport, and LSU-Shreveport even though virtually every economic consideration suggests it would be the fiscally prudent action to take.

That’s not to say it can’t be done. Gov. Dale Bumpers did it in Arkansas in 1971, when Arkansas A&M, a predominantly black school, was merged with the University of Arkansas and the planets and stars remained in alignment. Nationally, more than six dozen college and university mergers have taken place. One of the most notable was the merger of Marymount College and Loyola University in 1973 into what today is known as basketball powerhouse Loyola-Marymount.

But as one political observer said years ago, “They’ll close LSU before they close Grambling.”

Read Full Post »

Chaos & absenteeism define Jindal administration

Posted in Economy, Ethics, Governor's Office, Health Care, Higher Education, House, Senate, Jobs, Legislature, Legislators, Taxes, Transparency, tagged , , , , , on November 6, 2010| Leave a Comment »

If there’s a single word that could describe both the political and fiscal plight of Louisiana, that word would be chaotic. Absentee governor also comes to mind.

Gov. Bobby Jindal, when he’s not flying off to any of a growing number of other states to campaign for Republican candidates, is telling cabinet members and department heads to lead and to stop “whining” about proposed budget cuts that threaten to further stymie the state’s already stagnant economy and to gut higher education.

College presidents from one end of the state to the other are grappling with ways to keep from shutting down academic programs and laying off professors and teachers. The college presidents challenged Jindal’s Facebook criticism of the state’s colleges and universities for “underperforming” and for their “inefficiency.”

Professors also are entering the fray, openly criticizing the governor for everything from chronic absenteeism to insensitivity toward higher education as manifested by the administration’s deep budgetary cuts.

One legislator, perhaps with some measure of justification, or perhaps with an eye on the governor’s office in next year’s election, likewise accused Jindal of being absent from the state in a time of crisis.

Rep. John Bel Edwards of Amite described Jindal as absent without leave during “the most serious budget crisis in our history.” Edwards, a Democrat, said that Jindal “is not minding the store” and has been less than honest with Louisiana’s citizens about problems facing the state.

Edwards isn’t alone among legislators in offering criticism of the governor’s repeated optimistic proclamations on his statewide “Building a Better Louisiana for Our Children” tour. Press releases from the governor’s office quote Jindal as saying his administration is “doing more with less” and has “significantly cut government spending and reduced the size of government—while pursuing innovative programs that are more effective at providing services for our people.”

Several state senators, however, have called Jindal to task for what they feel is a lack of candor. The said he should be more straightforward about the types of severe budget cuts that will be necessary in order to balance next year’s budget. They said Jindal has been misleading the public in talking up cost savings and office consolidations while refusing to acknowledge the far-reaching budget cuts that will be needed to close the budget gap.

The president of the LSU student body gained national publicity recently when he wrote to a newspaper in New Hampshire where Jindal was campaigning. The letter asked the governor to return home and address the budgetary problems facing higher education. Only when J. Ryan Hudson’s letter got national attention did Jindal finally agree to meet with students to discuss cuts to higher education.

More recently, an LSU professor voiced similar sentiments, saying Jindal should do his job and “stop playing games.” A.R.P. Rau added that the governor, while critical of university sabbatical policies, failed to appreciate the irony that he is often “absent without leave from the state, neglecting it for his personal national aspirations.”

Perhaps the most significant criticism, however, came from Ed Steimel, retired president of the Louisiana Association of Business and Industry (LABI). Steimel, calling himself a longtime supporter of Jindal, now describes the governor as “a major disappointment” and said he no longer supports him. Steimel-perhaps with tongue in cheek, but perhaps not-even suggested that Hudson and Jindal swap jobs.

State Treasurer John Kennedy, sounding more and more like a potential 2011 challenger to his fellow Republican, has offered his own plan to balance the state budget now estimated to be more than $100 million in the red. Kennedy said his 16-point plan would produce an overall savings of $2.6 billion.

The governor’s office, even as it was responding to the college presidents, launched a web page dedicated to criticizing Kennedy’s proposals, with Commissioner of Administration Paul Rainwater saying that the state treasurer’s ideas were “unworkable.” Kennedy angrily responded to Rainwater, saying, “Tell me you don’t want to do it. Tell me you don’t have the political courage to do it. But don’t tell me it can’t be done.”

When he became governor, Jindal increased the size of the Louisiana Board of Ethics by more than two-thirds, from 23 to 39 staff positions but now has directed the agency to cut staff by 35 percent. Ethics Board Chairman Frank Simoneaux said personnel cuts would be “particularly egregious to us.” He said the board already in understaffed for it to perform the duties it is charged by law to do.

Department of Health and Hospitals Secretary Bruce Greenstein sent an Oct. 22 agency-wide email in which he said Jindal was “committed to providing the core health-care services and programs that our residents need.” At the same time, however, Greenstein announced a reorganization that “will lead to a reduction in staff.”

Even as Greenstein was parroting Jindal’s commitment to needed health-care services, physicians and legislators alike leveled stinging criticism of Jindal’s decision last week to scrap CommunityCare, a program which mainly serves children in providing primary-care physicians for Medicaid patients throughout Louisiana. By eliminating the extra $3 per patient per month paid physicians to coordinate care of individual Medicaid patients, Jindal said he hopes to cut spending by $16 million.

Nor is the governor the only one to incur the wrath of some observers. The same growing feeling of general frustration was also directed at the legislature.

A Baton Rouge retiree offered a proposal which isn’t likely to get many takers. He suggested that whenever cuts are necessary, legislators should be first in line to sacrifice. Bill Fontaine of the Baton Rouge suburb of Central said that would mean that salaries, staff, perks, and any other costs of making the legislature run must be cut proportionate to any cuts to higher education. “….imagine the legislators working for free when there is no budget to pay them…..” he said.

“But you see,” he added, “I’m a pessimist about legislative courage. I don’t think they have the courage to forgo some pay and/or benefits for the good of the people. They are just cowards and greedy grabbers….”

Even the Associated Press is beginning to call attention to Jindal’s growing propensity to speak of Louisiana’s economy in more glowing terms than its citizens back home can see.

Saying that the governor seems more focused on his own political future than on problems back home, AP points out that Jindal conveniently leaves out the bad news about the state’s finances when describing his administration’s accomplishments during appearances in other states.

The latest example of Jindal’s apparent propensity to embellish his image of the state came as recently as Oct. 27 in Wisconsin.

Appearing on behalf of eventual winning gubernatorial candidate Scott Walker, Jindal and Governors Bob McDonnell of Virginia and Haley Barbour of Mississippi told Wisconsin voters that their strategies of cutting taxes and shrinking government worked in their states. Their pronouncements prompted Walker to call the three his inspiration when he is asked how he will create jobs and make government smaller. Calling them “great leaders,” Walker said, “They did it and we’re going to do it.”

Jindal boasted that Louisiana’s economy improved when he cut or repealed tax increases passed under his Democratic predecessor Kathleen Blanco, adding that Americans need leaders who can balance budgets, create jobs, and cut taxes. (Actually, the Stelly Plan to which he was apparently alluding, was passed in 2002, the final year of Republican Gov. Mike Foster’s administration.)

The “improved” economy of Louisiana is wrestling with the current budget deficit of $106 million. As if that were not sufficiently severe, next year’s deficit is pegged—by the Jindal administration itself—at $1.6 billion while others project an even bigger budgetary shortfall.

Back home in Louisiana, however, Jindal said it will be necessary for cabinet members and department heads to deliver better value with fewer dollars. “We don’t need whining. We do need leadership,” he said at a Capitol press conference. Then, apparently satisfied to leave the leadership to others, he immediately left for Pittsburgh to attend a fundraiser for the Republican gubernatorial candidate in Pennsylvania.

Read Full Post »

« Newer Posts - Older Posts »