Louisiana at the CrossroadsResponses to Louisiana’s Financial Crisis

Louisiana Association of Nonprofit OrganizationsPublic Policy Institute

April 6, 2011

1

WWW.LABUDGET.ORG

2,000 state employees to lose their jobs

Charity hospitals funding cut

College education to cost more

Public schools forced to absorb inflation

increases

Raiding the Millennium Trust Fund (tobacco

settlement money) to pay for TOPS

FY2012 Budget Highlights

2

Employee Reductions 11% reduction since FY2008

3

FY2008 FY2009 FY2010 FY2011 FY2012 (Exec. Budget)

70,000

72,000

74,000

76,000

78,000

80,000

82,000

Department of Social Services 44% reduction since FY2008

4

FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 (Exec. Budget)

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

$200,000,000

$220,000,000

$240,000,000

LSU Health Care Services 32% reduction since FY2008

5

FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 (Exec. Budget)

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

$75,000,000

$80,000,000

$85,000,000

$90,000,000

$95,000,000

$100,000,000

Sta

te G

en

era

l Fu

nd

Higher Education 30% reduction since FY2009

6

FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 (Exec. Budget)

$700,000,000

$800,000,000

$900,000,000

$1,000,000,000

$1,100,000,000

$1,200,000,000

$1,300,000,000

$1,400,000,000

$1,500,000,000

$1,600,000,000

$1,700,000,000

Department of Education Level funding for 3 years

7

FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 (Exec. Budget)

$3,050,000,000.00

$3,100,000,000.00

$3,150,000,000.00

$3,200,000,000.00

$3,250,000,000.00

$3,300,000,000.00

$3,350,000,000.00

$3,400,000,000.00

Youth Services 20% reduction since FY2008

8

FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 (Exec. Budget)

$100,000,000

$110,000,000

$120,000,000

$130,000,000

$140,000,000

$150,000,000

$160,000,000

2011 2012 2013 2014

Revenues $7,831 $8,264 $8,621 $9,027

Expenses $7,736 $9,800 $10,184 $10,475

Balance $95 ($1,536) ($1,563) ($1,448)

State General FundProjected Budget Deficits FY2012-

14(millions)

9

$1.6 billion ÷ $25.5 billion = 6%

Deficit as Percent of Total Budget

10

FY12 Projected Shortfall Total FY11 Budget

Percent of total FY11 budget to

be cut over 3 years

11

$1.6 billion ÷ $7.7 billion = 21%

Deficit as Percent of State General Fund Spending

12

FY12 Projected Shortfall FY11 State General Fund

Percent of FY11 state general fund to be cut in FY12

13

$1.6 billion ÷ $2.6 billion = 62%

Deficit as Percent of Discretionary Spending

14

FY12 Projected Shortfall

Percent of FY11 discretionary fund to

be cut in FY12

FY11 Discretionary Funds

15

Community & Technical Colleges

Food Stamps

LACHIP

Medicaid

State General Fund Revenue

0% 10% 20% 30% 40%

37%

20%

16%

13%

2%

Increases Since Pre-KatrinaFY05-FY10

16

FY05 FY06 FY07 FY08 FY09 FY10 FY11 $-

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,000

Total State BudgetTotal State Budget Less Hurricane Disaster Recovery FundingState General Fund

Spending Reverts to Pre-Katrina Levels (in 2009 dollars)

17

(in millions) FY08 FY09 FY10 FY11 FY12 5-Year Total

Excess Itemized Deductions $152 $250 $255 $260 $265 $1,182

Bracket Changes N/A N/A $359 $251 $262 $872

Total Cost $152 $250 $614 $511 $527 $2,054Source:Department of Revenue for Excess Itemized Deductions, except FY12, which is LBP estimateLegislative Fiscal Office for Bracket Changes

Fiscal Effect of Stelly Repeals

18

19

Louisiana NeedsBetter Choices

441 tax exemptionsCurrent cost: $7.1 billion

A Better ChoiceReview Tax Exemption Budget

20

State general fund revenues: $7.7 billion

Cost of tax exemptions: $7.1 billion

Tax code spending equals 92% of SGF revenues

FY 2011 Budget Projections

21

From the list of 441…

22

Tax Expenditure / Tax Breaks Cost to Taxpayers

Deduction for federal income taxes $696,000,000

Excess federal itemized deductions $323,000,000

Insurance premium tax credit $200,000,000

Horizontal drilling exemption $168,000,000

Enterprise zone credit $110,000,000

Income shifting by multistate corporations $32,000,000

Paying businesses to file sales taxes timely $27,000,000

Plus 179 sales tax exemptions $3,900,000,000

More than one-third of these exemptions were enacted during the last 10 years…

Tax Collections vs. Exemptions

23

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

In M

illions

of

Dollars

Corporation

Income Sales

Individual

Income

Corporation

Franchise Severance

Petroleum

Products

Actual Collections $435 $2,465 $2,240 $145 $774 $593

Total Potential Collections $1,768 $6,360 $3,314 $147 $1,128 $604

Estimated Exemptions $1,333 $3,895 $1,074 $2 $354 $11

Percentage of Tax Loss 75.4% 61.2% 32.4% 1.1% 31.4% 1.8%

24

Sales tax exemption for groceries

Sales tax exemption for RX drugs

Sales tax exemption for residential electricity

Earned income tax credit

$328 million

$238 million

$146 million

$46 million

Exemptions can be good or bad . . .

. . . but all tax expenditures should be honestly and

fairly reviewed

Example:Of 179 sales tax exemptions, 90 are lumped under “Other Exemptions” at a cost of $3.8 billion of $4.7 billion or 80%

A Better Choice

Make Tax Exemption Budget More Transparent

25

26

A Better Choice

Review Louisiana’s Tax Structure for Fairness

State & Local Taxes in 2007

27

LSU Public Policy Research Lab

2011 Louisiana SurveyKirby Goidel, Director

28

0

20

40

60

5 6

4841

5 3

4151

4 5

44 46

Public Opinion Divided on How Best to Handle Budget Shortfall

2009 2010 2011

LSU Public Policy Research Lab29

Cuts gone too far

Cuts not gone far enough

Budget cuts about right

Don't know0

5

10

15

20

25

30

35

40

4540 41

6

13

40 39

8

13

Public Opinion Divided on Whether Budget Cuts Have Gone Too Far or Not Far Enough

2010 2011

LSU Public Policy Research Lab30

Primary and secondary education

Health care for the poor

Colleges and universities

Roads and infrastructure

Vocational and workforce training

Environmental regulation

Economic development projects

0 10 20 30 40 50 60 70 80

7

10

10

10

11

22

24

24

23

29

40

43

45

48

Louisiana Residents Unwilling to Wield the Budgetary Axe?

Major Cuts Minor Cuts

LSU Public Policy Research Lab31

Gas a

nd o

il

Reduc

ing

Homes

tead

Exe

mpt

ion

Stat

e sa

les ta

x

Highe

r Ear

ning

Indi

vidu

als

Toba

cco

Alcoho

lic b

evar

ages

Gamin

g in

cas

inos

0

20

40

60

80

925

4453

68 71 77

9

2943

5773 76

85Support for Specific Taxes

2010 2011

LSU Public Policy Research Lab32

No

de

dic

ati

on

De

dic

ate

d t

o im

pro

vin

g r

oa

ds

De

dic

ate

d t

o s

tate

co

lleg

es

an

d

un

ive

rsit

ies

De

dic

ate

d t

o s

tate

he

alt

h c

are

Gas Tax Income Tax

010203040506070

9

5261 61

Support of Dedicated Tax Increases

LSU Public Policy Research Lab33

0.0

20.0

40.0

60.0

25 24

51

15

27

59

Buyer’s Remorse on Stelly Repeal?

2010 2011

LSU Public Policy Research Lab34

Support; 55.8Oppose, 29.4

Don't know; 14.8

Support for Temporarily Reinstating Stelly Tax Provisions to Address Current

Budget Shortfall

LSU Public Policy Research Lab35

36

“We levy a tax, then we grant exemptions of that tax and it costs $7 billion. . . . This is something that ought to be looked at.”

Speaker of the House Jim TuckerBaton Rouge Advocate

February 2, 2011

Better Choices ARE possible

37

The budget is “devastating” Suspending tax exemptions is “something we should debate”

Senate President Joel ChaissonBaton Rouge Business Report

September 24, 2010

We need Better Choices - NOW!

Join Better Choices for a Better

Louisiana TODAY!

www.BetterChoicesLa.org

38