State leaders have just days left to make difficult decisions to pull Louisiana out of its dire financial crisis. And with talk of massive cuts and plans to increase revenue that will impact everything from early education to services for our most vulnerable residents to higher education, as well as a sales tax increase that will hit the hard-up the hardest, it seems clear that the state plans to balance the budget on the backs of poor and Black Louisianans.
With all of the steady and urgent nature of conversations surrounding our state’s fiscal crisis, we decided at The New Orleans Tribune to spend some time looking at Louisiana’s money matters to consider and offer steps to save the revenue needed to meet the bottom line. To be sure, we know that some of our suggestions, such as ending TOPS and school vouchers, may not set well with many who see these programs as untouchable sacred cows. But the questions that must be answered as Louisiana examines how and why it spends its revenue is whether programs are performing their intended goals and whether they are helping the people most in need of help. Our state must start treating its budget the same way average Louisianans treats their own. A state’s budget is a direct reflection of its values and moral compass.
Much has been made of former Gov. Bobby Jindal’s role in creating the problem we are now faced with. And while that is valid, the mess is now Gov. John Bel Edwards and the current state legislature’s to handle. Also given that some of the same lawmakers now in state Senate and state House served during Jindal’s time, they should know that they bear a special responsibility to clean this mess up. Excuses and bogus claims of not understanding the issues or knowing the facts will not acceptable. You have been elected to perform an important duty and you sought this job, so get to it—giving it every ounce of gravity, honesty and resoluteness the people that have entrusted you with the vote and their voice deserve.
We also suggest that our newly elected Governor lead by example. While we have not dismissed all hope that Gov. Edwards can help move Louisiana forward, we think he has gotten off to a shaky and questionable start with pay raises for his top staff even as the state has to figure how to make up for a nearly $1 billion shortfall. We simply do not find a sense of authentic leadership and good judgement in raising salaries for top execs with one pen and raising sales tax for consumers with another.
Of course, we understand that these pay raises hardly represent a drop in the bucket when compared to the fiscal fiasco Louisiana faces—a nearly $1 billion shortfall that must be addressed immediately, followed by a $2 billion crisis for the next fiscal year. But when a ship is sinking, you do not intentionally take on more water—not even a little bit. And more importantly, you demonstrate to both those you lead and serve that your commitment to using public funds wisely starts at the very top. Raising salaries for folk already out-earning many Louisianans by three and four times is not a good look for leadership.
Neither is it lost on us that Gov. Edwards tapped a Black lawmaker state Rep. Katrina Jackson (D-Monroe) to carry his one-cent sales tax hike to the legislature for him—as if that will make us feel any better when we’re paying more at the cash registers. News flash: getting screwed doesn’t feel less painful just because it looks like black hands are turning the screws. In fact, it might even hurt a little more.
It is time for Louisiana to get serious about its money matters.
PLUG LEAKS, WASTEFUL SPENDING AND IMPROVE FISCAL ACCOUNTABILITY All together the use of some $8 billion in tax credits, incentives, suspensions and exemptions need to be examined to decide if they are worth the revenue the state is passing on.
The Louisiana Legislatives Auditor’s (LLA) recently released annual report Key Audit Issues 2016, reveals a pattern of “failure to address recurring issues, a lack of effective internal controls, and nearly $1.8 billion in waste and inefficiencies continue to challenge the state.”
The report is a summary of major fiscal troubles discovered by the legislative auditor—many of them recurring issues that if addressed before could have helped Louisiana avoid its current challenge. Among items noted in the report:
- The questionable decision to suspend collection of severance tax (the tax levied on the production of natural resources taken from the land) revenue of horizontally-drilled wells, which cost Louisiana more than $1.1 billion between 2010 and 2014. While some states have approved reducing their severance tax rate for horizontal wells, Louisiana is the only state to have suspended it completely. Why this decision was ever made is unconscionable. This complete suspension of the tax has offered the oil companies a significant tax break and ostensibly encouraged the building of new wells to mine natural resources. But it has cost Louisiana lots of money—so much money that the current budget crisis could have completely eliminated.
- The Office of Homeland Security and Emergency Preparedness has consistently paid for work that was not in the scope of approved projects, paid contracts and made purchases that did not comply with federal and state procurement guidelines and reimbursed expenses that were not supported by invoices, receipts, lease agreement, contracts or any documentation to the tune of more than $170 million in 2015, of which $43.5 million in expenditures have neither been resolved or deemed as exceptions, according to the report.
- The continued failure of the Recovery School District to maintain and correctly report movable property assets, totaling over $800,000 for the current year and more than $6.1 million for the past three years.
According to Legislative Auditor Daryl Purpera, the annual report brings out two major themes, “the failure to address the same audit findings year after year and the lack of effective internal controls, which is an ongoing problem”, which has he continues to note is unacceptable given the nearly $3 billion shortfall “In both instances,” Purpera says, “state and local governments lose money, which hampers their ability to provide services, and the public’s trust is undermined. The ramifications of these problems are even more acute considering the state is facing a nearly $2.5 billion revenue shortfall over the 2016 and 2017 fiscal years.”
He is right.
Moreover, another report recently released by the state legislative auditor that examines the performance of the state’s tax incentives, exemptions and suspension provide. According to that report, Louisiana has nearly $8 billion in total tax exemptions, which include individual income tax, certain sales tax, severance taxes, corporate income and franchise taxes, petroleum taxes as well as tax incentives and exemption contracts for the movie industry, enterprise zones, research & development and new market tax credits, for 2015
Countless economic studies indicate that average consumers spend money they get or have as a result of tax credits and exemptions. In other words, the money regular folk save at the grocery store and the pharmacy as a result of not having to pay sales tax on food or prescriptions or the money they get back on in the form of state income tax return, are actually spent and spur the economy.
Of course, it is widely accepted that tax exemptions and tax credits are a good way to spur the economy and introduce and encourage business activity of all types. The reality is the state has little to no data to indicate that many of the tax credits and exemptions it extends to big business and corporations are resulting in the desired outcome. And short of that data, many of these tax credits, incentives and exemption contracts ought to end.
The bottom line is that with its fiscal problems, the state of Louisiana can no longer afford to hand out tax credits and exemptions to major businesses like candy without documented proof that the state is getting the sort of return it needs and that the impact of that return is being felt by the all of the state’s residents—especially poor, disenfranchised and marginalized Louisianans most in need of the opportunities created by programs designed to develop and invigorate the economy.
END TOPS Saves at least $250 million annually
The program, with its G.P.A.s and ACT score requirements, has long failed to serve the students that need it most. The Tuition Opportunity Program for Students, ineffectively modeled after the efforts of the late Patrick F. Taylor, who set out on a personal mission some 30 years ago to ensure that 183 middle school students from disadvantaged backgrounds could go to college as long as they stayed out of trouble and graduated high school with a 2.5 GPA and a 17 on the ACT, no longer reflects the intent or spirit of that worthy endeavor. To be clear, poor and minority students are NOT benefitting from the largess of TOPS. So how about we just stop.
Today, TOPS Opportunity, Performance and Honors programs require ACT composites of 20, 23 and 27 respectively. Students must achieve GPAs of 2.5 for Opportunity TOPS and 3.0 or better for Performance and Honors TOPS. The reality is that disadvantaged and mostly Black students trapped in low-performing secondary schools with limited resources aren’t the ones that benefit from TOPs. Instead, it has become a kitty for the children of the state’s middle-class and well-to-do residents. Audits and evaluations of the program bear that fact out. The most recent TOPS report details that more than 74 percent of 2014 TOPS recipients are White and that more than 58 percent of 2013-14 graduates that enrolled in TOPS came from families with incomes of at least $70,000. In fact, nearly 20 percent reported family incomes of more than $150,000. More plainly, more than half of TOPS recipients have parents that can afford state college tuition. Moreover, students earning 3.0 or better GPAs and scoring in the mid to high 20s on the ACT can often count on some merit-based scholarships to help fund their tuition costs.
What’s more is that the number of students from middle class and affluent households using TOPS has grown steadily over the years. While the number of students from low-income backgrounds has remained stagnate over a 10-year period, which suggests that very little is being done to increase the pool of low-income students eligible for TOPs as the requirements have grown more stringent. We’re not surprised that the poorest students at low-performing schools aren’t getting TOPs at the same rate as well-to-do students because research repeatedly indicates that parental income and academic performance are causally related. This makes recent talk of raising the TOPS ACT requirement to 28 laughable.
So even as the state’s expenditure for the program swells, it has only fed into the cycle of poverty Patrick F. Taylor himself dreamed that his promise to those 183 kids from New Orleans would help to break. In 2016, you can’t get a TOPS grant for a 4-year school if you don’t have a 20 on the ACT. And if your parental income is hovering somewhere around the poverty line, it gets harder to earn that 20 on the standardized test. So why are we doing this again? Oh, yeah, so some White kid with rich parents can get a free ride to LSU. Yep, that’s we can’t wait to pay taxes.
Sure, free college education for all sounds great; but on paper and for a state facing the type of budget issues Louisiana is facing, spending public money for students whose parents can either fund their college education or who could otherwise earn academic scholarships to college is not wise. Ending TOPS as it now exists would save the state at least $250 million a year.
We further suggest any revamping/reintroduction of the program include income limits that ensure the program focuses on assisting students that meet some basic academic requirements and have a demonstrated financial need. In other words, if we are going to pay for students to go to college it should be for students who couldn’t afford to go without the state’s help.
END SCHOOL VOUCHERS Saves roughly $42 million annually
At an average cost of about $5500 for roughly 7400 vouchers statewide, this program cost taxpayers about $42 million in 2014-15 school year. This is money that can be used to shore up and improve resources at public schools, which would benefit far more children.
This again has simply not been a wise investment for the state of Louisiana; and here’s why. First, many of the private and parochial schools that receive these vouchers are doing so poorly at educating the students they already have that they have been prohibited from accepting new voucher students. In other words, the program supposedly defined to give parents the opportunity to improve their child’s education outcomes by sending them to a private school using public dollars is failing on that front.
Now here’s reason number two. Even if the vast majority of these schools were doing an excellent job at educating voucher students, the programs still does not do enough. There are more than 700,000 public school students in Louisiana; and surely more than 1 percent of them are attending poor performing public school. But the voucher program is only helping about 1 percent of students that would otherwise attend public schools, making putting that $42 million or so back into public education where it could benefit the most students a much better use of public money.
END CORPORATE WELFARE FOR PROFESSIONAL SPORT FRANCHISE OWNERS Would spell tens of millions of dollars annually in savings once the current contract between the State and the Saints has expired; and it would just make us feel a lot better.
Yes, we’re talking about Tom Benson. This notion that a professional sports team owner is somehow investing in a city or state and its people by simply owning and sustaining his franchise in a certain location is ridiculous. Tom Benson invested in Tom Benson. He is a savvy business owner and is filthy rich to prove it. His NFL team brings in annual profits of more than $30 million. His NBA franchise has an annual profit upwards of $11 million, according to Forbes. So why the Benson needs direct cash payments, more Superdome revenue, and additional payments from the state in the form of lease agreements, bonuses, tax breaks, rent on office space from Louisiana. We cringe every time we think about the senseless decision Bobby Jindal (our state’s very own Robin Hood in Reverse) made a few years back to sell Benson a state-owned property in New Orleans to only turn around and lease office space for state agencies in one of the buildings to the tune of $8 million a year to keep the billionaire, car salesman happy. Through this agreement, the state has actually been paying for office space in Benson Towers it wasn’t even using. Where do they do that?
In all, Benson will receive about $392 million from state subsidies through 2025 after inking his most recent agreement with the state–a state that has to scramble every fiscal year to keep afloat and still shortchanges health care, early childhood education programs.
It seems as if in Louisiana we love the Saints; but we loathe four-year-old children.
If the Bensons decide to move the team because they can’t get any richer on the taxpayer’s dime, oh well. The state of Louisiana survived for 155 years before the Saints came to town. We imagine it could survive for a century or two without them should they bail.
