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State fiscal cupboard bare but 80 NGOs seek $241 million; which campaign contributors will Jindal, legislators fund?

Posted in Budget, Campaign Contributions, Corruption, DHH, Economy, Education, Ethics, Finances, Golf Courses, Governor's Office, Health Care, Higher Education, Legislature, NGOs, Politicians, Privatization on March 21, 2015| 17 Comments »

By now, everyone who isn’t emotionally involved with Dancing with the Stars or Bachelor, is acutely aware that the state, going into the 2015 legislative session, is flirting with a $1.6 billion budget deficit.

And that doesn’t even take into consideration the growing backlog of sorely needed infrastructure repairs for state highways and universities totaling well over a billion dollars. Nor does it include previous deep cuts to health care and higher education.

Things are so bad that an increasingly desperate Bobby Jindal, running out of state buildings, vehicles and hospitals to sell or agency funds to raid, is even looking to sell the remainder of the state tobacco settlement money and the State Lottery in order to generate yet even more one-time revenue to cover recurring expenses.

And remember, this is the man who told the Monroe News-Star he was leaving the state in better shape than he found it. http://www.thenewsstar.com/story/news/politics/2015/03/13/gov-jindal-want-finish-strong/70262992/

Still, every year those non-government organizations (NGOs) make the obligatory trek to Baton Rouge with hands out, asking that legislators appropriate funding for their organizations. This year is no exception as 80 individual entities have submitted requests for funding of 89 separate projects totaling nearly $241.3 million.

Of that amount, $116 million, or 48 percent, were for NGOs in the greater New Orleans area.

Many of the requests are from the usual worthy organizations like councils on aging, youth groups and charitable organizations.

Among the larger requests:

  • $26 million for the Foundation for Science & Math Education in New Orleans;
  • $17.2 million for the Girl Scouts of Louisiana East in New Orleans;
  • $4.4 million for Kingsley House in New Orleans;
  • $1.6 million for the Louisiana Arts & Science Museum in Baton Rouge (two projects);
  • $8 million for the Louisiana Children’s Museum in New Orleans;
  • $5 million for the Louisiana Food Bank Association in Baton Rouge;
  • $4 million for the Louisiana Regional Leadership Council in Lafayette;
  • $27.7 million for a National Hurricane Museum and Science Center in Lake Charles;
  • $1.4 million for renovations to VFW Post 8852 in Alexandria;
  • $14.9 million for the North Desoto Water System in Stonewall;
  • $4.1 million for the Ogden Museum of Southern Art in New Orleans;
  • $1.2 million for Sci-Port (Louisiana’s Science Center) in Shreveport;
  • $10.7 million for repairs at the State Fair of Louisiana in Shreveport;
  • $2.1 million for Administrators of the Tulane Education Fund in New Orleans;
  • $4.3 million for Lighthouse for the Blind in New Orleans;
  • $4.9 million for the Louisiana Association for the Blind in Shreveport;
  • $3 million for the Baton Rouge Empowerment Foundation;
  • $10 million for the Gulf Coast Restoration and Protection Foundation in Baton Rouge;
  • $7 million for the Second Harvest Food Bank of Greater New Orleans and Acadiana;
  • $2 million for the New Orleans Jazz Orchestra;
  • $2.6 million for Loyola University in New Orleans;
  • $1.1 million for WYES Educational Television in New Orleans;
  • $11.8 million for University Hospital & Clinics in Lafayette (two projects);
  • $37.3 million for the Audubon Nature Institute in New Orleans;
  • $5.68 for the Biomedical Research Foundation Northwest in Shreveport;
  • $4.5 million for the NOLA Motorsports Hospitality Committee in New Orleans.

The last four warrant particular attention.

While all such organizations are barred from making political contributions because of their non-profit status, officers and members of their boards of directors are not bound by such restrictions. Jindal received $167,000, various members of the Louisiana House and Senate got $65,650, and the Louisiana Republican Party was the beneficiary of another $26,000 from seven principals connected with those four organizations.

University Hospital in Lafayette has been taken over by Lafayette General Medical Center in Jindal’s sweeping state hospital privatization scheme which raises immediate question of why the state should be funding projects at that facility.

Same for the Biomedical Research Foundation of Northwest Louisiana, which last year assumed operation of LSU Medical Center in Shreveport and E.A. Conway Medical Center in Monroe. The foundation received $5.7 million in state largesse last year.

The Audubon Institute receives millions of state dollars every year, much of which goes to the upkeep of the institute’s golf course. Last year, for example, Audubon Institute received $16.8 million in legislative appropriations.

But for sheer audacity, we give you the NOLA Motorsports Hospitality Committee. Here is its summary justifying its request for $4.5 million:

  • NOLA Motorsports Park in Jefferson Parish, through a competitive process, has been selected as the site for an INDYCAR event to be part of the championship Verizon INDYCAR Series. The selection was made, in part, because of the availability of a venue for the Event and related activities, transportation infrastructure, personnel, commitment to comply with the required specifications, and because of the collaborative relationships that have been established with other support entities. The Nola Motorsports Host Committee, Inc., a non-profit corporation, has committed to host a first-class Event and to plan and provide a unique and entertaining visitor experience for all which will include live music from Louisiana artists, regional cuisine, and demonstrations of Louisiana’s culture to enhance the visitor experiences for all participants including drivers, team owners, team supporters, corporate sponsors, family and guests, media, and other attendees; and
  • The public purpose of the Event is to provide supplemental funding to the Nola Motorsports Host Committee, Inc. to host the inaugural Indy Grand Prix of Louisiana which will support the expansion and promotion of tourism by producing an event that is projected to stimulate substantial growth in the Louisiana tourism industry, resulting in job creation and other increased economic activity, including the generation of tax revenue for state and local governments. Nola Motorsports Host Committee has secured a preliminary economic impact analysis from Formula, LLC which indicates an estimated economic impact of $27.8 million annually from the Event. INDYCAR has guaranteed a 3-year lifecycle of the Event with the goal of the Event being an annual occurrence. The goal is to attract visitors to Louisiana and to maintain awareness and a positive image of Louisiana as a unique and desirable travel destination. It is anticipated that the public benefit is proportionate to the obligations undertaken by the State. The State will receive tourism publicity and recognition for its support through verbal acknowledgements, media events, and in other related publicity associated with promoting and publicizing the Event.

But wait. Didn’t this same organization receive $4 million from the state just last year for track improvements after Jindal made a commitment to the track owners to come through with the money?

Well, yes and no.

This is where things get a bit murky.

You see, last year, when Jindal yanked a $4.5 million appropriation away from the developmentally disabled, it was to give the money to NOLA Motor Club (The NGO got $4 million, not the $4.5 it requested), a corporation that was established in September of 2009 and which remains in good standing.

This year, however, the $4.5 million request came from a corporation calling itself NOLA Motorsports Host Committee, established last June.

Both corporations listed their addresses at 11075 Nicolle Blvd. in Avondale, however, but had different officers, according to corporate records on file with the Secretary of State’s office.

But wait. There is a third entity: NOLA Motorsports established in May of 2008 and located at 2251 Drusilla Lane, Suite B in Baton Rouge. But that corporation is listed as inactive and records show its corporate status was revoked on Aug. 16, 2013.

One of the officers of NOLA Motor Club was Laney Chouest.

While Laney Chouest was listed as an officer for NOLA Motor Club, he is not listed among the officers for NOLA Motorsports Host Committee. It is nevertheless interesting to note that he, other members of the Chouest family and their many business enterprises have made $166,300 in campaign contributions since 2003. They include $43,800 to various legislators, $26,000 to the Louisiana Republican Party and $96,500 to Jindal.

What best illustrates the arrogance of that fiscally irresponsible appropriation, the thing that pushed it to the status of virtual malfeasance, is the fact that the Senate Finance Committee, taking its cue from Jindal, ripped $4.5 million from the budget for Louisiana’s developmentally disabled in order to free up the money for the racetrack. The lone dissenting vote was that of State Sen. Dan Claitor (R-Baton Rouge). https://louisianavoice.com/2014/05/26/senate-finance-committee-craters-to-jindal-rips-4-5-million-from-developmentally-disabled-for-racetrack/

But what compounds that unconscionable act was the motivation behind Jindal’s action.

The man who for his entire term of office has railed against government encroachment (see: federal stimulus funds, Common Core, medical care, prisons, etc.), obviously based his justification on political expedience and using state government to take care of his contributors.

Though Laney Chouest is not listed among the officers for NOLA Motorsports Host Committee, it is nevertheless interesting to note that he, other members of the Chouest family and their many business enterprises have made $166,300 in campaign contributions since 2003. They include $43,800 to various legislators, $26,000 to the Louisiana Republican Party and $96,500 to Jindal.

Two members of the Senate Finance Committee, Robert “Bret” Allain (R-Franklin) and Norbert “Norby” Chabert (R-Houma), received $2,500 each from Gary Chouest in 2010 and 2011.

Isn’t it interesting how a state so broke as to find itself unable to fund things like highway and bridge repair, health care, higher education, and a host of other essential services, can find $4 million for a race track, $7.7 million for golf courses across the state, $35.1 million for professional sports facilities, $10.1 million for local sports complexes, and another $3 million for baseball stadiums (including $1.4 million for a baseball stadium in Baton Rouge, when we don’t even have a team here)?

It will certainly be interesting to follow the outcome of some of these NGO requests.

Especially those last four on the list.

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Moody’s warns that Louisiana higher education can’t absorb further cuts; Gov. Bobby taking the state out of state colleges

Posted in ALEC, American Legislative Exchange Council, Budget, Economy, Education, Exemptions, Golf Courses, Governor's Office, Health Care, Incentives, Legislators, Legislature, Privatization on February 23, 2015| 23 Comments »

As our friend and former State Budget Officer Stephen Winham recently said when Moody’s and Standard & Poor’s recently moved Louisiana’s credit outlook from stable to negative, the bond rating agencies are finally waking up to what the rest of us have seen coming for some time now.

Now Moody’s has gone on record as saying what Gov. Bobby refuses to acknowledge: Louisiana’s public universities are not equipped to absorb additional credit stress expected with an anticipated cuts of yet another $300 million.

State Treasurer John Kennedy agrees while Joseph Rallo, barely acclimated to his new office after being chosen last October as the state’s eighth commissioner of higher education, tried to remain optimistic in the face of the latest announcement by Moody’s that the state’s colleges and universities are now in danger of having their credit ratings reduced if the legislature does not finally grow a set and stand up to Gov. Bobby.

“Moody’s is putting us on notice that it will reduce the credit ratings…if the legislature continues to cut higher ed funding,” Kennedy said. “We’ve cut our college campuses by $700 million since 2008. We’ve made deeper cuts than any other state. Enough is enough.”

Rallo told LouisianaVoice that it is not a matter of not having the revenue available to fund higher education, but rather it is an issue of allocation of funding. He said Moody’s is holding off taking the step of actually downgrading high education’s credit rating until June in order to see what the legislature will do to resolve the funding problem.

The problem at this point is twofold: Gov. Bobby refuses to take steps to increase revenue and legislators lack sufficient backbone to face Bobby down for fear of losing precious projects in their districts by veto. The legislature always blinks first.

Therefore, if Bobby won’t take steps to increase funding (he’s a party to that no-tax pledge the tea partiers forced down the throats of legislators and congressmen who had no taste for facing up to real problems and finding real solutions when self-serving rhetoric and pandering could get them re-elected), then the only alternative is to cut and cut again and then cut some more.

What these tea partiers and their ilk, including Gov. Bobby, refuse to admit in their manic pursuit of free market economics, is that corporate welfare (read lucrative tax breaks) costs this country many times what individual welfare costs and corporate fraud costs the nation billions upon billions more than the roughly 1 percent in documented welfare fraud (see details of the 2008 Wall Street bailout for verification). Corporations and corporate executives pay far fewer taxes, percentage-wise, than do middle- and low-income taxpayers in this country. Those are the cold, indisputable hard facts. To claim otherwise is to throw up that same tired old argument that the middle- and low-income are a drag on the nation’s economy while the super-rich produce wealth and jobs, thank you very much.

But Gov. Bobby would much rather continue doling out tax breaks that cost the state billions of dollars with little or no return than to take the necessary steps to pull the state out of the financial quagmire in which it currently finds itself and thus allow college to be affordable to the middle class and for the working poor of this state to have access to health care.

And legislators are a party to the scheme and must share the blame. Let’s consider some projects in the districts of four key legislators from the 2014 legislative session:

  • Appropriations Committee Chairman Rep. Jim Fannin: $13 million in projects, including the Jackson Parish Riding Arena and Livestock Pavilion ($195,000 last year, $1.4 million in Priority 2 and $1.6 million in Priority 5 funding;
  • Senate President John Alario: $121 million in projects for Jefferson Parish;
  • House Speaker Chuck Kleckley: $107 million in projects in Calcasieu Parish;
  • Senate Finance Committee Chairman Jack Donahue: $60 million in projects in St. Tammany Parish.

And then there are these little projects we found in last year’s capital outlay bill:

  • City Parish Golf Complex improvements (Orleans)—$9.1 million;
  • Junior Golf Training Facilities (Caddo)—$445,000;
  • Golf Course Development (Calcasieu)—$1.6 million;
  • Zephyrs Baseball facilities repair (Jefferson)—$1.5 million;
  • Professional Sports facilities improvements (Jefferson, Orleans)—$18.4 million;
  • New Orleans Sports Arena improvements (Orleans)—$41.5 million;
  • Bayou Segnette Recreation Complex (Jefferson)—$5.5 million;
  • Improvements to New Orleans Superdome—$6 million;
  • Recreational complex (Iberia)—$100,000;
  • Baseball stadium improvements (East Baton Rouge)—$1.4 million (Baton Rouge has no baseball team);
  • Improvements to amusement area, tennis center improvements (Orleans)—$1.2 million;
  • Repairs to Strand Theatre (Caddo)—$950,000;
  • Various community centers (statewide)—$11 million;
  • Various hall of fame projects (statewide)—$15 million.

One can just follow the money to see why legislators become shrinking violets when Gov. Bobby is holding that veto pen. Sure, there will be all manner of posturing, bluster and harangue but in the end, they always end up going along with whatever the governor wants.

And the governor wants what the American Legislative Exchange Council (ALEC) wants and ALEC wants to take the state out of state universities.

And Louisiana isn’t alone.

If you don’t believe that, just take a look at what is going on in Wisconsin, Illinois, Arizona and Kansas. http://neatoday.org/2015/02/19/cuts-to-higher-education-taking-public-public-universities/

  • Louisiana: Tuition costs have increased 90 percent since Gov. Bobby took office;
  • Arizona: Tuition has more than tripled while state funding has decreased by $3,500 per student;
  • Wisconsin: Like Louisiana, $2 billion tax cuts have resulted in $300 million in cuts to higher education that could eliminate the schools of nursing, law, business, pharmacy and veterinary medicine at the University of Wisconsin-Madison even as Gov. Scott Walker lobbies for $220 million in public donations to the Milwaukee Bucks to build a new team arena;
  • Illinois is losing $2.1 billion in tax revenues because of lawmakers’ refusal to extend taxes that are expiring even as colleges are facing a $400 million cut;
  • Kansas is projecting a loss of $5 billion in revenues because of reckless tax cuts and higher education, not surprisingly, is on the chopping block.

It’s not a coincidence, it’s a pattern. And what would one suppose these five states have in common besides this disturbing trend in higher education funding?

Republican governors who feel they owe their allegiance not to the voters of their states, oddly enough, but to ALEC and the Koch brothers who insist on defunding state colleges and universities in the hopes they will be forced to become private universities.

That, of course, will drive tuition up even further, necessitating much larger student loans and greater profits to lending institutions and Wall Street. It also will make a college education assessable only to the wealthy while relegating the rest of society to low paying jobs in the service sector in the absence of manufacturing jobs that have all been moved offshore.

Louisiana, says Moody’s latest assessment, has had the steepest declines in state funding in the nation from 2009 through 2014.

“As the state tries to close its widening budget gap, Louisiana public universities will face additional reductions in state appropriations,” the assessment said. “After five years of the deepest cuts to public higher education in the nation and significant expense reductions, these universities are ill-equipped to face additional credit stress.”

Moody’s said the timing and magnitude of budget cuts, the ability of universities to quickly align expenses with revenue, and the degree of financial cushion to absorb operating volatility “will factor into our assessment of ratings and outlooks for individual universities.

“Currently, Louisiana public university credit quality is lower than the median A1 nationally, reflecting historically weak state funding, anemic operating performance and limited liquidity,” the report said.

So while legislators wring their hands and gnash their teeth over the hard decisions they’re going to have to make this year, just remember no one held a gun to their heads and made them drop those golf courses and baseball parks into the Capital Outlay bill last year. And the year before that. And the year before that.

And remember that Gov. Bobby and ALEC do not (boldface that: Do Not) have the survival of our universities as public institutions as a priority item. If they are ultimately forced to become private colleges, that will be perfectly fine with them.

With all due respect to Dr. Rallo, we shouldn’t expect too much from this governor in the way of meaningful solutions to a problem that has persisted since he became governor more than seven years ago—long before the latest decline in oil prices which he conveniently uses as a scapegoat for Louisiana’s fiscal ills.

The late Wiley Hilburn, who headed up the journalism program at Louisiana Tech University, once told us that Bobby visited the Ruston campus when he was Commissioner of Higher Education under former Gov. Mike Foster, ostensibly to get an overview of university operations. Instead he spent his entire visit in Hilburn’s office playing computer games.

Perhaps that’s what Louisiana’s public colleges and universities are to Gov. Bobby—a game with students serving only as action figures for his personal enjoyment.

It certainly appears that that’s all this state is to him.

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After three legal setbacks, the next logical step for π-yush is to follow the lead of Egypt’s Morsi: suspend the court system

Posted in ALEC, American Legislative Exchange Council, BESE, Education, Ethics, Golf Courses, Governor's Office, Health Care, Higher Education, Judges, Legislature, Legislators, LSU, Prison, Privatization, Retirement, Teague, Toledo Bend, Water Sale on December 6, 2012| 7 Comments »

First it was a federal judge who threw out Piyush Jindal’s voucher plan in Tangipahoa Parish because it posed a major setback to the parish’s current desegregation consent decree.

Then, last Friday, a state district judge, Tim Kelley, whose wife once worked for Piyush, said the method of appropriations to fund the statewide voucher program is unconstitutional.

Fast on the heels of Kelley’s ruling, fellow Baton Rouge District Judge William Morvant refused to throw out a lawsuit challenging the only part of Piyush’s far-reaching retirement reform proposals that survived the legislative session earlier this year.

In case you’re counting, that’s oh-for-three—not a good batting average for the governor who would be president.

Keep in mind that Piyush is the incoming chairman of the National Republican Governors’ Association.

Remember, too, that he thought he would be moving into that position in the hope that it would be the launching pad for his presidential aspirations. To do so, he needed to bring something substantial to the table.

That something was to be sweeping education reform. That was to be the centerpiece of his list of grand accomplishments, the bold-face type on his curriculum vitae.

Now, the status of both education and retirement reform are suddenly in jeopardy.

Suddenly the star of the errand boy of the American Legislative Exchange Council (ALEC) doesn’t shine quite so brightly.

What to do?

The obvious answer would be to teague someone. That practice, after all, has served him well in the past. No college president, attorney, doctor, agency head, legislator or rank-and-file state employee will dare rebuke Piyush lest he or she be shown the door.

There was a time when we would have run a recap of those teagued by this peevish little man, but the list has grown so long that it would take up far too much space.

On reflection, however, one must ask just what are Piyush’s alternatives?

Well, normally he could campaign against the re-election of judges Kelley and Morvant—except he already did the anti-judge campaign thingy in Iowa.

He can’t teague the federal judge; he was appointed by the president.

He can’t teague either of the state judges—Kelley or Morvant—because they were elected by voters of the 19th Judicial District.

He can’t teague Jimmy Faircloth, the attorney who so expertly represented the interests of the state in arguing on behalf of the voucher program because Faircloth was working under a contract that ends when all appeals are exhausted—about $100,000 or so down the road.

He can’t teague Angéle Davis, wife of Judge Kelley because she already resigned her position as Commissioner of Administration.

He can’t teague the legislator who introduced the education bills because they were not written by any Louisiana elected official but by the corporate honchos at the American Legislative Exchange Council (ALEC).

He might consider teaguing Superintendent of Education John White since there are already unconfirmed rumors floating around that he is leaving soon.

But there is a far better option open to Piyush:

He could take a page from the playbook of Egyptian President Mohammed Morsi.

It’s such a simple solution we’re surprised no one has thought of it before.

All he has to do is first invoke that obscure nullification clause which several states unhappy with last month’s presidential election are bantering about—the one that says states can unilaterally ignore a federal law they don’t like. Or even opt out of the union itself. Some in Texas are talking about splitting off and breaking the state into five separate states (pure lunacy, but a philosophy that dovetails nicely with that of the Tea Party).

Then, like Morsi, Jindal can unilaterally decree greater authority for himself, including issuing a declaration that the wrong-headed courts are henceforth barred from challenging his decisions.

(Come to think of it, such a move is not exactly unprecedented. President Andrew Jackson said of the U.S. Supreme Court’s decision that the state of Georgia could not impose its laws on Cherokee tribal lands, “(Chief Justice) John Marshall has made his decision, now let him enforce it.”)

After that, he could even take it a step further and, like North Korea’s late Kim Jong-il, bestow upon himself the title of “Dear Leader,” and, again like Kim Jong-il, commission a song of the same name in his honor.

Think about it. If he were to take that action, he could sell prisons, the old insurance building property, hospitals, roads, universities, the Saints and the Zephyrs, not to mention a few state-owned golf courses and state parks.

That water from Toledo Bend Reservoir? Sold. Gone to Texas and a few select political cronies are even richer than before.

And you only think you’ve seen a lot of corporate tax breaks, incentives and exemptions. Once he issues his decree, corporate taxes would disappear into that sink hole in Assumption Parish.

All state employees who aren’t fired outright (to be replaced by telecommuting administrative types from Florida, California, Alabama and elsewhere) would immediately forfeit all health and retirement benefits—except for friendly former legislators who, of course, would be elevated to six-figure salaries with full benefits.

The Department of Civil Service, public schools and the State Ethics Board would become distant memories for the nostalgic among us.

Of course, were he to take such action, he could always say his decision was predicated “by three things: one, to protect needed reform packages; two, to streamline government so at the end of the day, we can do more with less, and three, I have the job I want.”

Opponents could be expected to condemn his decrees as heavy-handed and dictatorial but what else would you expect from those who represent the coalition of the status quo?

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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.

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Rhodes Scholar Governor absent on pothole day

Posted in Budget, Earl Long, Huey Long, Golf Courses, Governor's Office, Health Care, Higher Education, Legislature, Legislators, Prison, Privatization, Transparency on December 14, 2010| 3 Comments »

Earl Long is generally credited with the following quote:

“Don’t write anything you can phone. Don’t phone anything you can talk. Don’t talk anything you can whisper. Don’t whisper anything you can smile. Don’t smile anything you can nod. Don’t nod anything you can wink.”

And so it came to pass that one day just before the Christmas season in the year of our Lord 2010, Louisiana Gov. Bobby Jindal and his Chief of Staff Little Timmy Teepell were sitting across from one another at a table heavily laden with seasonal food winking at each other.

It was the governor who, breaking political protocol, interrupted the silence first.

BJ: I’m bored.

Little TT: Bored?

BJ: Yes, bored. I’ve been stuck here in the state for three whole days now.

Little TT: What do you suggest, Governor?

BJ: A road trip.

Little TT: But governor, all the elections are over. There’s no one to campaign for. And we’ve done the book tour thing.

BJ: Well, I’m bored. What can we do?

Little TT: Well, Governor, the natives are pretty restless. They think you should remain in the state a couple of weeks and work on the budget deficit.

BJ: TWO WEEKS!!!!?? Bor-ring!

Little TT: Seriously, Governor, we need to discuss ways to raise revenue for the state to offset an anticipated $1.6 billion budget deficit next year.

BJ: Isn’t there a hurricane or an oil spill or some other disaster that can give me face time on the TV cameras so I can act governorential?

Little TT: Governorential?

BJ: Yes. You know, where I go on TV and blame the federal government for everything.

Little TT: No there isn’t anything like that right now. Let’s talk about the budget.

BJ: I know! I can take the state helicopter to a little Baptist Church up in Shongaloo and give ‘em a stimulus check.

Little TT: We can do that on Sunday. Today’s Tuesday. Let’s talk about the budget until then.

BJ: All right. But it’s boring. There’re no TV cameras.

Little TT: That’s okay. You’ll get all the TV coverage you want if you solve the budget crisis.

BJ: Really? Oh, boy! What do we have to do?

Little TT: We need to take measures to raise cash to erase next year’s budget deficit.

BJ: That should be easy. I’m a Rhodes Scholar and (laughing) you’re a Roads Scholar. Isn’t that what you said in your interviews, you’re a Roads Scholar?

Little TT: That’s right, Governor, but remember, we were both absent on pothole day.

(Laughter.)

BJ: That’s funny. A Roads Scholar. Pothole day. I get it. What does that mean?

Little TT: Don’t worry about it. It was just a joke. Now to generate some revenue, we need to sell off some state assets.

BJ: Like what?

Little TT: Well, we can sell all those new state buildings that Governor Foster built and then lease the space back. That should gives us about a hundred million or so up front.

BJ: But didn’t I read somewhere once that selling any fixed asset on a sale-leaseback basis is an act of desperation triggered by cash flow problems?

Little TT: But that’s precisely where we are: We’re desperate because we have cash flow problems.

BJ: But it would place us, the seller, in the position as a long-term lessee. Isn’t that the same as a debtor or bond obligor? That seems like a quick fix to a long-term problem. It’s just deferring a permanent resolution to a problem and not fixing the underlying problem.

Little TT: Governor, you’ve been reading your old campaign literature again, haven’t you? You need to eighty-six that. Drop the rhetoric; you won the election.

BJ: Oops, I forgot.

Little TT: We can also sell a couple of state prisons—those in Winn and Allen parishes. That should bring in about $64 million or so.

BJ: Won’t the buyer just work the mortgage payments back into what he charges the state to house state prisoners?

Little TT: Governor, have you been talking to legislators and not telling me?

BJ: Sorry.

Little TT: Governor, you’ve got to stop that. Legislators aren’t your friends. Now focus. We can also draw against future lottery revenue to get another infusion of cash.

BJ: But what if somebody living in a trailer park wins the lottery? I don’t want him knocking on the front door of the governor’s mansion asking for his money.

Little TT: Don’t worry about that. Listen to me. These are all short-term solutions. It will give us one-time money to cover recurring expenditures but it doesn’t matter. By the time those people in north Louisiana who elected you figure it out, you’ll be well on your way to running for president.

BJ: And you’ll be my little Karl Rove. TT, I see where you’re going with this and I like it. Hell….I mean heck, we can sell the state police cars and put them on bicycles. That should work. When I was in Oxford doing my Rhodes Scholar bit, they had Bobbies on foot. We can call ‘em Bobbies on bicycles. Voters will love that.

Little TT: That would be pretty drastic. The state police would probably need cars….

BJ: How ’bout if I just sold my soul?

Little TT: You already did that to get elected.

BJ: How about selling some of the state golf courses?

Little TT: That’d probably look pretty bad. We just bought the Tournament Players Club in New Orleans and took over the Poverty Point club up in Delhi and we’re in the process of building a couple of others. How could we explain the sudden change? Those golf courses are viable investments. Even as we speak, we’re in the process of taking bids on the construction of a miniature golf course at City Park in New Orleans. What I’m saying, Governor, is we’re committed on these expenditures.

BJ: How about selling the Pentagon Barracks?

Little TT: Can’t do that, either. We have legislators living in them and the new owners might raise their rent from the $300 they’re paying now to a level comparable to other apartments. The legislature is already mad enough. We can’t risk that.

BJ: How about cutting higher education and health care benefits then?

Little TT: Now you’re thinking like the governor I know and respect. Let’s sing some nice Christmas carols:

Jindal Bells, Jindal Bells,
Jindal all the way;
Oh how sad
Is his wishy-washy way—HEY!

Jindal Bells, Jindal Bells,
On another flight
Oh how nice we all do feel
When he is out of si–ight.

Away at a fund raiser
No one does he dread;
Not running for president,
At least that’s what he said.

But from afar
We know what they say,
Move over Obama,
Jindal’s on his way.

Oh, little state of Louzian
How sorry is your plight;
With Bobby selling all our jails,
Citizens now feel pure fright.

While in our dark streets linger
A refracted gleam of light;
From guns and knives will lives
Be lost in thee tonight.

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